Driving on Indian roads has never been a great pleasure but having people who either do not know how to drive or have scant regard for fellow drivers compounds to it. The reason for this is not too far to seek. These so called drivers have obtained license not by knowing driving or rules but having contacts with the right "intermediaries"!
I am not a very keen driver but have been on the highways a couple of times in the recent past. I realise that roads are of standards that compare well but the absolute lack of discipline is appalling. The heavy vehicles will invariably be driving on the lane intended for lighter vehicles. You will have lorries and tractors coming on the wrong side as the driver wants to avoid the trouble of going and taking a U turn. Users paying toll charges would expect not only good roads but safety as well.
Coming back to the issue, the largest source of problems is the indiscriminate issue of driving licenses and if we are in the position to control that at an early stage, road safety would be very high. I wonder as to why there is no concrete measure to exercise greater control. It is not rocket science or does not require enactments like the Right to Information Act to conclude that the department is a virtual cesspool of corruption and touts.
Having got the license, the user (I shall avoid using the terms driver, as does not know to drive) goes about using it road with absolute impunity as he knows tha there is hardly a system to monitor the same. The less said the better about policing on the roads. The levy of penalty is so paltry and the constable is least interested in going through the process and would rather pocket a percentage of the fine! Corporates would do well to learn on this part of the win-win situation. Even in a worst case scenario, if the person's license is impounded it would be easier and cheaper to obtain a fresh one rather can going back through the legal system. There is no way on stop the menance of multiple licenses and one only hope that Mr. Nandan Nilenkani and team address this through the prestigious UIN Project!
The government would do well to privatise the monitoring of traffic signals to unemployed youth! The government and police could through the process of bidding share the revenue of installing cameras as intersections. Alternatively, the traffic offenders should be asked to monitor othe offenders till they book atleast 5 others to take over from them. This would be best form of community policing.
One is not sure if it is indifference or helplessness on the part of the police has led to the situation. I know of a recent case when a group of doctors had petition to the traffic department of recurring fatal accidents at a busy residential intersection. One more life was lost yesterday and by the end of the day the police had rushed into having speed breakers. While on the subject of speed breakers, it is noticed that police department have erected speed barriers on the roads and many a times that appears to be a greater source of threat than speeding itself. Innovative marketeers have found a way to advertise on those barriers to blinding the view further.
The need to reduce the number of vehicles is a known factor but that is not going to happen until the public transport system takes some burden. The drivers of the public transport system are lords of the road and reigning them in appears to be impossible task. The political class would do well in handling polcy issues (assuming that they do) and let these small issues to dealt with by the process of law.
Till then happy and safe driving!
Thursday, November 19, 2009
Wednesday, January 28, 2009
Satyam Fiasco and Legal System
The recent fiasco in the Satyam case has brought out some serious issues that could have long term judicial implications.
To begin with, a case of the nature demands that there is coordinated action amongst the various agencies. I am not suggesting that it did not exist but what intrigues me is the fact that the capital markets regulator and the SFIO have been consistently denied access to question the accused for close to a month. This leads one to an inevitable question if there is more to it than the eye meets! One surely is not absurd to wonder if SEBI and SFIO should be entitled to it. In this case the market loss is in far in excess of Rs 7000 crores of the alleged fraud. Second if even in such cases the local CID with its archaic systems is going to get precedence for investigations then our law makers must have been naïve to have thought of the SFIO.
Compare this with what happened in China in the case of the melamine in the milk. The case that was first reported only a couple of months back but the trial has already been completed and the guilty convicted including a death sentence for a couple of them.
The other aspect was the arrest of the auditors of the company. I am not defending them at all but upset at the gross abuse of the judicial process. How else will one explain the arrest on a saturday evening knowing fully well that they will not be in a position to obtain a bail over the next two days being public holidays. The other aspect relates to the statement of the investigating officer. In the absence of access to the FIR one has to take it as the reason. The reason attributed was that they did not perform their responsibilities as external auditors! That would warrant action under the Companies Act and professional disciplinary action and not action straight away under the criminal procedure code! If lack of accountability can warrant action of the nature suggested we need to take some actions straight away. First let us all walk around with anticipatory bails and second the governments need to obtain budgetary support for expanding the capacity of all prisons! Well surely could classify as infrastructure projects during recessionary times!
To begin with, a case of the nature demands that there is coordinated action amongst the various agencies. I am not suggesting that it did not exist but what intrigues me is the fact that the capital markets regulator and the SFIO have been consistently denied access to question the accused for close to a month. This leads one to an inevitable question if there is more to it than the eye meets! One surely is not absurd to wonder if SEBI and SFIO should be entitled to it. In this case the market loss is in far in excess of Rs 7000 crores of the alleged fraud. Second if even in such cases the local CID with its archaic systems is going to get precedence for investigations then our law makers must have been naïve to have thought of the SFIO.
Compare this with what happened in China in the case of the melamine in the milk. The case that was first reported only a couple of months back but the trial has already been completed and the guilty convicted including a death sentence for a couple of them.
The other aspect was the arrest of the auditors of the company. I am not defending them at all but upset at the gross abuse of the judicial process. How else will one explain the arrest on a saturday evening knowing fully well that they will not be in a position to obtain a bail over the next two days being public holidays. The other aspect relates to the statement of the investigating officer. In the absence of access to the FIR one has to take it as the reason. The reason attributed was that they did not perform their responsibilities as external auditors! That would warrant action under the Companies Act and professional disciplinary action and not action straight away under the criminal procedure code! If lack of accountability can warrant action of the nature suggested we need to take some actions straight away. First let us all walk around with anticipatory bails and second the governments need to obtain budgetary support for expanding the capacity of all prisons! Well surely could classify as infrastructure projects during recessionary times!
Sunday, January 18, 2009
Corporate Governance & Crisis Management
A couple of week’s back I had an occasion to write on corporate governance and succession planning in a very different context. Little did I realise that the implications of planning for continuity in business management would become as evident and critical as seen in the context of the alleged fraud at Satyam. A sure case study on corporate governance for sometimes to come. Viewed in a larger context, business continuity management is an integral part of the succession planning process.
Developing an effective crisis management plan is not an option for an organisation but a hallmark of good corporate governance. The source for a crisis may be events like an industrial accident, product failure, financial improprieties, sexual harassment allegations, or a hostile takeover. To think of it, one does not have to go very long back in memory to recall that very famous Indian corporate brands like Cadbury’s, Satyam, Infosys, Zandu Pharma, have been in the news for each one of the examples cited. Any event that suddenly threatens a company's financial performance, reputation, employee retention, customer relations has the potential to become a full blown out crisis. An organisation response to a crisis will have a significant bearing on its short-term and long-term performance.
In a discussion on business continuity planning it is not uncommon for people to look around at the technology heads as if to indicate that it business continuity is inseparably linked only to technology! Threats to business continuity can arise from natural disasters, human being, technology and socio-political factors.
The ability of management or the leadership team to recognise the fact a crisis is brewing or emerging is by itself a science. This is as critical a phase as the golden hour in the case of an accident victim. The recognition of the early warning signals of an emerging crisis is critical to trigger actions that need to be initiated to contain the follow out of the same.
An international study conducted a couple of years back assessed the financial impact of 15 major corporate crises, ranging from product recalls to industrial accidents and terrorism found that the stock prices of companies that managed their crises well rose 7% on average in the year following the crisis. By contrast, the stock price of companies with less effective crisis management dropped 15%.
For initiating an effective crisis management strategy, it is critical to understand the impact that the event could have on the various assets of the organisation including and more importantly the reputation and brand. Having done that it is important for the team to draw up a vulnerability assessment to determine the implications of a potential threat on the various assets.
Having understood the vulnerabilities and sources for discontinuities in the business, the first responsibility of the management team should be to identify mitigating measures that are proactive and prevent as many of them. The singularly critical aspect of this would be to have a well-defined “Crisis Management Team” the constitution of which should be cross functional with clearly defined roles and responsibilities. More often than not, most potential sources are avoidable or atleast the impact of the event can be minimized. This category includes crisis caused by employee or mismanagement, poor oversight, or inadequate operating procedures. A cursory look at some of the management reports of listed companies would reveal that most of the identified risks are so predictive and responses linear. One does hope that these are only for public consumption and are not representative of all the risks identified by the management.
The next key issue for management to be prepared for is a containment action in the event of a crisis. The crisis management team should act fast to assert control over events. Decisions need to be quick without procrastination. The management would be better of in presuming that the crisis would get worse and become public. Management must be honest and open with their stakeholders. Board of directors, more importantly the independent directors, can play a significant role in this early phase of the crisis especially when the source of the crisis is the existing senior management including the CEO. Good corporate governance assumes even more significance as a badly handled crisis can cause major damage on the organisation’s reputation or financial results. The board, comprising of both promoter and independent, have an important responsibility in ensuring that the management have a comprehensive crisis management strategy in place and more importantly, the plan exercised regularly and reviewed no differently from any other audit, financial or performance. It would not be out of context for the audit committee to shoulder this responsibility.
The lessons learnt out the exercise or an event needs to be documented and looped back into the learning process to revisit the crisis management plan along the lines of the Deming Cycle - Plan Do Check Act (PDCA). Organisations could use the principles enunciated in the British Standard BS 25999 on Business Continuity Management.
Every organisation should learn from the events around them and initiate appropriate actions lest they are exposed to a similar situation. Professionals, independent directors and the like should take a proactive role and insist on these for events like the ones we are midst of a source of major credibility erosion.
Developing an effective crisis management plan is not an option for an organisation but a hallmark of good corporate governance. The source for a crisis may be events like an industrial accident, product failure, financial improprieties, sexual harassment allegations, or a hostile takeover. To think of it, one does not have to go very long back in memory to recall that very famous Indian corporate brands like Cadbury’s, Satyam, Infosys, Zandu Pharma, have been in the news for each one of the examples cited. Any event that suddenly threatens a company's financial performance, reputation, employee retention, customer relations has the potential to become a full blown out crisis. An organisation response to a crisis will have a significant bearing on its short-term and long-term performance.
In a discussion on business continuity planning it is not uncommon for people to look around at the technology heads as if to indicate that it business continuity is inseparably linked only to technology! Threats to business continuity can arise from natural disasters, human being, technology and socio-political factors.
The ability of management or the leadership team to recognise the fact a crisis is brewing or emerging is by itself a science. This is as critical a phase as the golden hour in the case of an accident victim. The recognition of the early warning signals of an emerging crisis is critical to trigger actions that need to be initiated to contain the follow out of the same.
An international study conducted a couple of years back assessed the financial impact of 15 major corporate crises, ranging from product recalls to industrial accidents and terrorism found that the stock prices of companies that managed their crises well rose 7% on average in the year following the crisis. By contrast, the stock price of companies with less effective crisis management dropped 15%.
For initiating an effective crisis management strategy, it is critical to understand the impact that the event could have on the various assets of the organisation including and more importantly the reputation and brand. Having done that it is important for the team to draw up a vulnerability assessment to determine the implications of a potential threat on the various assets.
Having understood the vulnerabilities and sources for discontinuities in the business, the first responsibility of the management team should be to identify mitigating measures that are proactive and prevent as many of them. The singularly critical aspect of this would be to have a well-defined “Crisis Management Team” the constitution of which should be cross functional with clearly defined roles and responsibilities. More often than not, most potential sources are avoidable or atleast the impact of the event can be minimized. This category includes crisis caused by employee or mismanagement, poor oversight, or inadequate operating procedures. A cursory look at some of the management reports of listed companies would reveal that most of the identified risks are so predictive and responses linear. One does hope that these are only for public consumption and are not representative of all the risks identified by the management.
The next key issue for management to be prepared for is a containment action in the event of a crisis. The crisis management team should act fast to assert control over events. Decisions need to be quick without procrastination. The management would be better of in presuming that the crisis would get worse and become public. Management must be honest and open with their stakeholders. Board of directors, more importantly the independent directors, can play a significant role in this early phase of the crisis especially when the source of the crisis is the existing senior management including the CEO. Good corporate governance assumes even more significance as a badly handled crisis can cause major damage on the organisation’s reputation or financial results. The board, comprising of both promoter and independent, have an important responsibility in ensuring that the management have a comprehensive crisis management strategy in place and more importantly, the plan exercised regularly and reviewed no differently from any other audit, financial or performance. It would not be out of context for the audit committee to shoulder this responsibility.
The lessons learnt out the exercise or an event needs to be documented and looped back into the learning process to revisit the crisis management plan along the lines of the Deming Cycle - Plan Do Check Act (PDCA). Organisations could use the principles enunciated in the British Standard BS 25999 on Business Continuity Management.
Every organisation should learn from the events around them and initiate appropriate actions lest they are exposed to a similar situation. Professionals, independent directors and the like should take a proactive role and insist on these for events like the ones we are midst of a source of major credibility erosion.
Friday, December 26, 2008
Risk Management in Healthcare Organisations
As one gets sick, distressed and tired of reading day in and day out the impact and implications of the meltdown in the global economy, global terrorism and other related aspects one thing is certain to happen – irrespective of whether or not the depression is as deep as the early 1930’s the number of people who are going to be extremely depressed is going to significantly higher!
The news item on the increase by nearly 30% of the anti-depressant drugs in India and the long waiting lists for appointments with counselors is a clear indication of that.
The increasing corporatisation of the healthcare industry for a multitude of reasons with the simultaneous increasing awareness amongst all segments is bound to bring the healthcare service providers under pressure from multiple fronts. The publication, in a business magazine, of a leading Delhi based hospital being accused of medical negligence causing the death of senior functionary from an industry confederation is a sure pointer in this regard. Even as I write this another news items that has been in the circuits is about the death of a 25 year old who participated in the clinical trials in a southern metro. The issue of regulatory monitoring in the sphere of medical diagnostics has been a major cause for concern amongst the medical fraternity. There have been reported incidents of patients test reports reflecting significantly varied readings from different laboratories. That by itself does not mean anything as one was not sure if the test results represented readings from the same sample or samples taken at different points of time! Irrespective of what the truth is, the fact remains that there has always been an element of doubt in the minds of the users if there are any controls on these establishments. One would be surprised to know that the medical diagnostic laboratory, in most parts of the country, operates under the Shops and Establishment Acts of the state. The fact that healthcare is a state subject has compounded to the problem. The Clinical Regulations Bill 2007 referred to the select committee in the parliament may not see the light of day before the term of current Lok Sabha.
Healthcare organisations in that context would do themselves good by embarking on a structured risk management strategy to deal with the multiple risks that they are exposed to. Organisational and professional reputation is going to be at stake. The quantum of risk is accentuated by the fact the process and service structure is significantly more complicated than a normal business process. The medical responses in each individual case could be significantly different but implications of the same enormous. One is reminded of the old joke of a mechanic removing the cylinder heads from the motor of a car of a famous heart surgeon in his shop. The mechanic after fixing the car straightened up, wiped his hands and asked argumentatively, "So doctor, look at this. I also open hearts, take valves out, put in new parts, and when I finish this will work as a new one. So how come you get the big money, when you and me is doing basically the same work? “The doctor leaned over and whispered to the mechanic and said: "Try to do it when the engine is running".
Any normal business organisation represents a plethora of inter connected complex process wherein on must expect and be prepared for something to go wrong. The implications of that in the context of healthcare organisations are profound. The role of paramedics and other support staff is extremely critical for successful outcomes. More often than not, it is at this interchange that things go wrong. The recent years have seen a number of good accreditation standards in the context of healthcare organisation being introduced. Some of the more prominent include that for hospitals in the form of the National Accreditation Board for Healthcare and Hospitals (NABH), both large and small, Laboratories (NABL), Blood Banks and more that have released targeted organisations wellness clinics that now covers practically the whole of the residual medical services other than hospitals. These have to a large extent adopted the already well accepted international systems like the JCI (Joint Commission International) USA or the Australia Council for Healthcare Standards (ACHS). Accreditation apart healthcare organisations would do well for themselves in embarking on implementing these well defined systems to ensure that their risks are minimized atleast from an operational perspective.
Without delving on the standards and its focus, one area that any healthcare organisation should definitely address is its management of sentinel events. Risks that healthcare organisations are exposed to are even more pronounced considering it has implications from a customer perspective, employee perspective, and the brand not to speak of just financial aspects. Sentinel event being defined as any unanticipated event in a healthcare setting resulting in death or serious physical or psychological injury to a person or persons, not related to the natural course of the patient's illness. Organisations like the JCI or ACHS have already defined many of these and have data and statistics of their occurrence. A healthcare organisation need not necessarily have to reinvent the wheel by trying to identify these. However, as the saying always goes act global think local - customization of these events to local conditions is a mandatory must. One may not have reported events, in the international scenario, of bodies being handed over to the wrong person; surgery on the wrong person; new born getting burnt in the incubator or a now born bitten to death by ants! A well defined and structured system to deal with sentinel events is definitely warranted.
The other aspect that needs attention in the current context is the ability of hospitals to manage public emergencies. The UNIDO document on the management of public emergency definitely warrants attention by organisations. The recent incidents in Mumbai definitely warrant the need for more structured response at hospitals to public emergencies be it natural disasters or man-made. The ministry of health should make it mandatory for all healthcare organisations to establish and practice responses in respect of public emergencies. The clinical regulations bill should also make it mandatory for all healthcare organisations to report defined sentinel events including near misses so that the data could be used by other organisations to review their own processes and initiate preventive actions.
The corporatisation of healthcare organisations not to speak of the large public hospitals in the area of public charitable trusts has meant that the stakeholders in these organisations have gone up manifold. The public awareness to medical negligence has also gone by quite a bit. The management team should equip itself to deal with situations in more comprehensive manner. Implementation of process based systems is extremely critical. Organisations need to implement these systems from a more holistic perspective and not merely an accreditation point of view. Even the accreditation needs to be from a constructive point of view and not a critique representing the personal views. Organisations should also clearly recognise the fact that accreditation or certification is only the beginning and not go back to old times post the event. This is particularly true in India where the system needs to continuously monitored and audited with the active participation of the senior management team till the system is completely and comprehensively internalised.
The news item on the increase by nearly 30% of the anti-depressant drugs in India and the long waiting lists for appointments with counselors is a clear indication of that.
The increasing corporatisation of the healthcare industry for a multitude of reasons with the simultaneous increasing awareness amongst all segments is bound to bring the healthcare service providers under pressure from multiple fronts. The publication, in a business magazine, of a leading Delhi based hospital being accused of medical negligence causing the death of senior functionary from an industry confederation is a sure pointer in this regard. Even as I write this another news items that has been in the circuits is about the death of a 25 year old who participated in the clinical trials in a southern metro. The issue of regulatory monitoring in the sphere of medical diagnostics has been a major cause for concern amongst the medical fraternity. There have been reported incidents of patients test reports reflecting significantly varied readings from different laboratories. That by itself does not mean anything as one was not sure if the test results represented readings from the same sample or samples taken at different points of time! Irrespective of what the truth is, the fact remains that there has always been an element of doubt in the minds of the users if there are any controls on these establishments. One would be surprised to know that the medical diagnostic laboratory, in most parts of the country, operates under the Shops and Establishment Acts of the state. The fact that healthcare is a state subject has compounded to the problem. The Clinical Regulations Bill 2007 referred to the select committee in the parliament may not see the light of day before the term of current Lok Sabha.
Healthcare organisations in that context would do themselves good by embarking on a structured risk management strategy to deal with the multiple risks that they are exposed to. Organisational and professional reputation is going to be at stake. The quantum of risk is accentuated by the fact the process and service structure is significantly more complicated than a normal business process. The medical responses in each individual case could be significantly different but implications of the same enormous. One is reminded of the old joke of a mechanic removing the cylinder heads from the motor of a car of a famous heart surgeon in his shop. The mechanic after fixing the car straightened up, wiped his hands and asked argumentatively, "So doctor, look at this. I also open hearts, take valves out, put in new parts, and when I finish this will work as a new one. So how come you get the big money, when you and me is doing basically the same work? “The doctor leaned over and whispered to the mechanic and said: "Try to do it when the engine is running".
Any normal business organisation represents a plethora of inter connected complex process wherein on must expect and be prepared for something to go wrong. The implications of that in the context of healthcare organisations are profound. The role of paramedics and other support staff is extremely critical for successful outcomes. More often than not, it is at this interchange that things go wrong. The recent years have seen a number of good accreditation standards in the context of healthcare organisation being introduced. Some of the more prominent include that for hospitals in the form of the National Accreditation Board for Healthcare and Hospitals (NABH), both large and small, Laboratories (NABL), Blood Banks and more that have released targeted organisations wellness clinics that now covers practically the whole of the residual medical services other than hospitals. These have to a large extent adopted the already well accepted international systems like the JCI (Joint Commission International) USA or the Australia Council for Healthcare Standards (ACHS). Accreditation apart healthcare organisations would do well for themselves in embarking on implementing these well defined systems to ensure that their risks are minimized atleast from an operational perspective.
Without delving on the standards and its focus, one area that any healthcare organisation should definitely address is its management of sentinel events. Risks that healthcare organisations are exposed to are even more pronounced considering it has implications from a customer perspective, employee perspective, and the brand not to speak of just financial aspects. Sentinel event being defined as any unanticipated event in a healthcare setting resulting in death or serious physical or psychological injury to a person or persons, not related to the natural course of the patient's illness. Organisations like the JCI or ACHS have already defined many of these and have data and statistics of their occurrence. A healthcare organisation need not necessarily have to reinvent the wheel by trying to identify these. However, as the saying always goes act global think local - customization of these events to local conditions is a mandatory must. One may not have reported events, in the international scenario, of bodies being handed over to the wrong person; surgery on the wrong person; new born getting burnt in the incubator or a now born bitten to death by ants! A well defined and structured system to deal with sentinel events is definitely warranted.
The other aspect that needs attention in the current context is the ability of hospitals to manage public emergencies. The UNIDO document on the management of public emergency definitely warrants attention by organisations. The recent incidents in Mumbai definitely warrant the need for more structured response at hospitals to public emergencies be it natural disasters or man-made. The ministry of health should make it mandatory for all healthcare organisations to establish and practice responses in respect of public emergencies. The clinical regulations bill should also make it mandatory for all healthcare organisations to report defined sentinel events including near misses so that the data could be used by other organisations to review their own processes and initiate preventive actions.
The corporatisation of healthcare organisations not to speak of the large public hospitals in the area of public charitable trusts has meant that the stakeholders in these organisations have gone up manifold. The public awareness to medical negligence has also gone by quite a bit. The management team should equip itself to deal with situations in more comprehensive manner. Implementation of process based systems is extremely critical. Organisations need to implement these systems from a more holistic perspective and not merely an accreditation point of view. Even the accreditation needs to be from a constructive point of view and not a critique representing the personal views. Organisations should also clearly recognise the fact that accreditation or certification is only the beginning and not go back to old times post the event. This is particularly true in India where the system needs to continuously monitored and audited with the active participation of the senior management team till the system is completely and comprehensively internalised.
Monday, December 8, 2008
Succession Planning & Governance
Even as one stands paralysed with disbelief at the happenings around us, another stark fact begins to hit you harder. The absolute lack of foresight or a sense of urgency that exists at various levels on the need for succession plan to deal with contingencies be it in an emergency or otherwise.
How else would one explain the situation where the financial capital of the country has been hit hard, the home minister and the chief minister have either resigned or shown the door but the decision makers are have sat and procrastinated for whole week trying to identify their successors? The moot point here is that if the state did not require the key functionaries at this point of time then did they ever require them! Is this the time for us to exhibit our classical indecisiveness?
This is not the first time that we have observed this situation, be it an emergency or normal time. We have had innumerable occasions in the past wherein key posts at regulatory bodies or heads of institutions where the incumbent tenure was completed and the successor not nominated until the last moment or positions kept vacant for day, weeks and months. On the one hand, we have a policy that rightly stipulates that senior positions require that the candidates should have minimum residuary service of atleast two years but then the same policy does not provide that the succession should take place well in advance so that the succession is seamless and complete. The case in point is that succession planning is being ignored as a key governance issue at all levels be it public administration or at various levels in corporate. We are excellent in fire fighting, for we created it and then have a false sense of pride when flames are doused.
Succession Planning is not a will
Succession planning is not be equated to that of a will or a last testament. The will or the last testament would be one of the components of an effective succession plan. Succession planning is not be made only the context of a retirement but needs has to be made in the context any emergency be it temporary unavailability to permanent vacancy for whatever reason. The quality of leadership would largely be determined by the fulfillment its obligation on leadership matters. The existence of well-conceived and defined succession plan can go a long way in enhancing the confidence levels for all the stakeholders and can be an enormous source of reassurance.
Well-defined process
A well-orchestrated succession plan should to exhibit a lot of thought, planning and above all execution. There are definitive principles enunciated for the process of a succession plans. Amongst them include - Identifying the right leader at the right time; It is leadership driven collaborative process; It is a continuous process; constantly ensuring that the pool in churned for size and quality and circumstances; It should be driven by a carefully articulated strategy.
Succession planning is a dynamic and creative process. It would belittle the process to reduce something very significant to a formula. A few basic rules do apply. To begin with, the leadership team should take responsibility for “Ownership” of the succession planning. The plan should be reviewed and updated at least once a year. The plan should contain key elements like an assessment of the organisational management requirements; an assessment of the strengths and weaknesses of the incumbent head and others in the existing hierarchy; identification of potential internal candidates and above all an interim transition plan, particularly where there is no clear internal successor and a separate emergency crisis management plan with designated internal interim successors.
Viewed in the context of above requirements, it would observed that more often than not the succession plans are driven by adhocism, crisis management of the poorest quality driven by events that could have easily been identified and addressed with great ease.
A debate on succession is definitely bound to evoke passionate debates on whether the successor needs to be an insider or should be lateral selection from outside. One can never give a opinion on this that a perfect fit in all circumstances. An insider would definitely be the choice if the organisation is already on good growth path and it just requires management. On the other hand if organisation requires a transformation or a dramatic shift in strategy an outsider would be a more appropriate choice.
No discussion on succession planning would be complete without a discussion on the need for mentoring. An effective succession plan, amongst others, would necessarily have to address the need for grooming of the identified successor. Mentoring can be the one of most effective and efficient means to bridge the current and future. It does not require outside facilitators or trainers as it builds on the internal strengths. It is more often than not the most institutionalized process of transfer of knowledge, often be the single most important goal of a succession-planning program. It would be giving a new sense of purpose to the older generation of being recognised as it lets them know that they are valued. It can provide a renewed energy and motivation as they are in the last lap of their professional career. As far as the identified successor goes it gives him a great opportunity to use an old horse as a sounding board and can take the decisions under well-controlled conditions for decisions are bound to be monitored and reviewed to ensure that impact of wrong decisions are minimized.
Succession planning is an inevitable process that has to be addressed except if one is willing to risk the peril of postponing the inevitable. Family run organisations sometime need it more as the seniors find it hard to cut the proverbial umbilical cord. Cricket buffs would recall the famous words of Graham Yallop the stylish Australian batsman who retired at the peak of his career and wrote in his memoirs that was better to quit when people are still asking why rather than why not”!
How else would one explain the situation where the financial capital of the country has been hit hard, the home minister and the chief minister have either resigned or shown the door but the decision makers are have sat and procrastinated for whole week trying to identify their successors? The moot point here is that if the state did not require the key functionaries at this point of time then did they ever require them! Is this the time for us to exhibit our classical indecisiveness?
This is not the first time that we have observed this situation, be it an emergency or normal time. We have had innumerable occasions in the past wherein key posts at regulatory bodies or heads of institutions where the incumbent tenure was completed and the successor not nominated until the last moment or positions kept vacant for day, weeks and months. On the one hand, we have a policy that rightly stipulates that senior positions require that the candidates should have minimum residuary service of atleast two years but then the same policy does not provide that the succession should take place well in advance so that the succession is seamless and complete. The case in point is that succession planning is being ignored as a key governance issue at all levels be it public administration or at various levels in corporate. We are excellent in fire fighting, for we created it and then have a false sense of pride when flames are doused.
Succession Planning is not a will
Succession planning is not be equated to that of a will or a last testament. The will or the last testament would be one of the components of an effective succession plan. Succession planning is not be made only the context of a retirement but needs has to be made in the context any emergency be it temporary unavailability to permanent vacancy for whatever reason. The quality of leadership would largely be determined by the fulfillment its obligation on leadership matters. The existence of well-conceived and defined succession plan can go a long way in enhancing the confidence levels for all the stakeholders and can be an enormous source of reassurance.
Well-defined process
A well-orchestrated succession plan should to exhibit a lot of thought, planning and above all execution. There are definitive principles enunciated for the process of a succession plans. Amongst them include - Identifying the right leader at the right time; It is leadership driven collaborative process; It is a continuous process; constantly ensuring that the pool in churned for size and quality and circumstances; It should be driven by a carefully articulated strategy.
Succession planning is a dynamic and creative process. It would belittle the process to reduce something very significant to a formula. A few basic rules do apply. To begin with, the leadership team should take responsibility for “Ownership” of the succession planning. The plan should be reviewed and updated at least once a year. The plan should contain key elements like an assessment of the organisational management requirements; an assessment of the strengths and weaknesses of the incumbent head and others in the existing hierarchy; identification of potential internal candidates and above all an interim transition plan, particularly where there is no clear internal successor and a separate emergency crisis management plan with designated internal interim successors.
Viewed in the context of above requirements, it would observed that more often than not the succession plans are driven by adhocism, crisis management of the poorest quality driven by events that could have easily been identified and addressed with great ease.
A debate on succession is definitely bound to evoke passionate debates on whether the successor needs to be an insider or should be lateral selection from outside. One can never give a opinion on this that a perfect fit in all circumstances. An insider would definitely be the choice if the organisation is already on good growth path and it just requires management. On the other hand if organisation requires a transformation or a dramatic shift in strategy an outsider would be a more appropriate choice.
No discussion on succession planning would be complete without a discussion on the need for mentoring. An effective succession plan, amongst others, would necessarily have to address the need for grooming of the identified successor. Mentoring can be the one of most effective and efficient means to bridge the current and future. It does not require outside facilitators or trainers as it builds on the internal strengths. It is more often than not the most institutionalized process of transfer of knowledge, often be the single most important goal of a succession-planning program. It would be giving a new sense of purpose to the older generation of being recognised as it lets them know that they are valued. It can provide a renewed energy and motivation as they are in the last lap of their professional career. As far as the identified successor goes it gives him a great opportunity to use an old horse as a sounding board and can take the decisions under well-controlled conditions for decisions are bound to be monitored and reviewed to ensure that impact of wrong decisions are minimized.
Succession planning is an inevitable process that has to be addressed except if one is willing to risk the peril of postponing the inevitable. Family run organisations sometime need it more as the seniors find it hard to cut the proverbial umbilical cord. Cricket buffs would recall the famous words of Graham Yallop the stylish Australian batsman who retired at the peak of his career and wrote in his memoirs that was better to quit when people are still asking why rather than why not”!
Friday, November 7, 2008
Global Readjustments
The trauma and tribulations in the global markets now in the financial markets are bound to see the effect trickle, or maybe a wave, across all sectors and countries. The bail-out packages that are being worked are bound to bring some sense of sanity in the market but it would be naïve to expect that it would have a sustaining effect. One already gets the impression that initial sense of comfort is already beginning to wane. The long term comfort will necessarily have to come from metamorphic changes in the global macro economic and business landscape.
Countries gasping for breadth
There have been some initial pointers in that direction. Let us start at a very macro-economic view point. A couple of countries have already borne the initial brunt of the problem with significant economic implications. Take the case of the help Russia extended USD 5.4 Billion to the banks in Iceland to overcome the problems of the financial fall-out. The extent of funding which is about a third of GDP of Iceland is bound to change the global political alignments in the times to come. The second is the case of the Argentina which is on the verge of commiting default for the third in the last decade. Not a very comforting situation for any one. Now there is news that the Hungary is process of seeking assistance from the International Monetary Fund. Ukarine, Turkey and more will follow suit in the times to come. The number of countries that having been standing the doorstep of the international funding agencies are going up and the list will increase at a faster rate than what has been seen. One should not be surprised if therefore we do find USA itself jumping the queue! Lesser mortals like our own neighbour are in the brink of bankruptcy.
Changing shareholding patterns in national icons
There has already been enough news on the sovereign funds accounting for significant part of commercial organisations that have been more synonymous or iconic in countries to which they belong. Take the cases of Citi Bank where sovereign funds from Abu Dhabi are the largest shareholders. This is the similar story with a whole host of corporate and financial houses in the USA where the Chinese investments are the largest not to speak of the Japanese which always had a significant amount of investments. The recent policy shifts of some of proponents of the free market economy to have government investments in banks point to sudden sense of national insecurity due to foreign shareholding.
In the business world the recent news about General Motors and Ford Motors were having had talks on the sidelines examining the option of merging gives definitive pointers to the ominous future that is unfolding. That having had its problems we now hear that GM and Chrysler are in talks for a possible merger.
The collapse of Kaupthing Bank in Iceland is bound to throw a whole host of problems to commercial houses in UK. The Reykjavik-based bank owns stakes in a variety of retail chains and there is expectation that the administrator of the UK entities may sell the holding to private equity firms.
We may now see the next wave of cross border mergers and acquisitions between companies who were at one point of time fierce competitors. What will be even more surprising is the fact that these mergers and acqusitions would not be restricted to only companies having problems.
On the Indian front, recent announcement of the strategic alliance between Jet and Kingfisher only goes to show that the strategic thinking has taken been quite dramatic. Both the cases one in US and other in India only goes to show that thinking has to be out of the box to resolve issues that are out of the ordinary.
Currency Volatility
The global financial markets have seen an extreme level of currency volatility over the last one year. A number of companies have gone bust in the process of embarking on exotic currency trades. Many companies have lost heavily having paid a hefty price in lure of short term profits. This definitely, in hindsight, was not something that most corporates were equipped to handle.
If the consistent depreciation of the dollar against all currency was the order of the time for a good part of 2007, the reverse has been true over the last couple of months. The dollar has appreciated close to 20% against most currencies in the last couple of months. One is not sure if the dollar has appreciated or other currencies have lost ground. A classic case of glass half full and half empty! What would intrigue most is the fact that on one side the country, viz., USA, is reportedly having problems in its financial system that never seem to ending and here we see its currency appreciating! No one has yet a very plausible reason for it but one rationale way to explain it would be the fact the dollar is the currency for international trade and there is a shortage for dollars as no one is willing to part with it! Banks are not willing to lend to each let out facilitate credit expansion. Banks are refusing the recognize letters of credit issued by other banks. So commercial transactions in international trade is taking place on cash basis that explains the shortage for dollars. Strange it may sound but that appears to be the reality.
The shortage of funds appears to be so acute that gold, normally considered a safe haven investment instrument in uncertain times, has lost close to 20% of its value in the last couple of months. That at a time when uncertainty was at its peak. It is possible to explain the phenomena to excessive speculation in the past but here again the unloading for the purposes of generating cash could be reason.
One of the significant issues that are bound to surface in the next couple of months is the acceptance of Euro! The emergence of a single European currency to counter the dollar is now going to be put to acid test. The foundation of the Euro as a currency is based on the compliance to an agreed macro economic discipline. These are bound to be questioned by nationalists in countries and incumbent governments may be under pressure to take populist decisions that are contrary to the Euro norms! One, therefore, should not be surprised if we see the re-emergence of the dual currency norm in the next couple of months!
As has been rightly said, the DNA of the world is about to change. So let us all brace up and tighten our seat belts for turbulent weather and heavy landing.
Countries gasping for breadth
There have been some initial pointers in that direction. Let us start at a very macro-economic view point. A couple of countries have already borne the initial brunt of the problem with significant economic implications. Take the case of the help Russia extended USD 5.4 Billion to the banks in Iceland to overcome the problems of the financial fall-out. The extent of funding which is about a third of GDP of Iceland is bound to change the global political alignments in the times to come. The second is the case of the Argentina which is on the verge of commiting default for the third in the last decade. Not a very comforting situation for any one. Now there is news that the Hungary is process of seeking assistance from the International Monetary Fund. Ukarine, Turkey and more will follow suit in the times to come. The number of countries that having been standing the doorstep of the international funding agencies are going up and the list will increase at a faster rate than what has been seen. One should not be surprised if therefore we do find USA itself jumping the queue! Lesser mortals like our own neighbour are in the brink of bankruptcy.
Changing shareholding patterns in national icons
There has already been enough news on the sovereign funds accounting for significant part of commercial organisations that have been more synonymous or iconic in countries to which they belong. Take the cases of Citi Bank where sovereign funds from Abu Dhabi are the largest shareholders. This is the similar story with a whole host of corporate and financial houses in the USA where the Chinese investments are the largest not to speak of the Japanese which always had a significant amount of investments. The recent policy shifts of some of proponents of the free market economy to have government investments in banks point to sudden sense of national insecurity due to foreign shareholding.
In the business world the recent news about General Motors and Ford Motors were having had talks on the sidelines examining the option of merging gives definitive pointers to the ominous future that is unfolding. That having had its problems we now hear that GM and Chrysler are in talks for a possible merger.
The collapse of Kaupthing Bank in Iceland is bound to throw a whole host of problems to commercial houses in UK. The Reykjavik-based bank owns stakes in a variety of retail chains and there is expectation that the administrator of the UK entities may sell the holding to private equity firms.
We may now see the next wave of cross border mergers and acquisitions between companies who were at one point of time fierce competitors. What will be even more surprising is the fact that these mergers and acqusitions would not be restricted to only companies having problems.
On the Indian front, recent announcement of the strategic alliance between Jet and Kingfisher only goes to show that the strategic thinking has taken been quite dramatic. Both the cases one in US and other in India only goes to show that thinking has to be out of the box to resolve issues that are out of the ordinary.
Currency Volatility
The global financial markets have seen an extreme level of currency volatility over the last one year. A number of companies have gone bust in the process of embarking on exotic currency trades. Many companies have lost heavily having paid a hefty price in lure of short term profits. This definitely, in hindsight, was not something that most corporates were equipped to handle.
If the consistent depreciation of the dollar against all currency was the order of the time for a good part of 2007, the reverse has been true over the last couple of months. The dollar has appreciated close to 20% against most currencies in the last couple of months. One is not sure if the dollar has appreciated or other currencies have lost ground. A classic case of glass half full and half empty! What would intrigue most is the fact that on one side the country, viz., USA, is reportedly having problems in its financial system that never seem to ending and here we see its currency appreciating! No one has yet a very plausible reason for it but one rationale way to explain it would be the fact the dollar is the currency for international trade and there is a shortage for dollars as no one is willing to part with it! Banks are not willing to lend to each let out facilitate credit expansion. Banks are refusing the recognize letters of credit issued by other banks. So commercial transactions in international trade is taking place on cash basis that explains the shortage for dollars. Strange it may sound but that appears to be the reality.
The shortage of funds appears to be so acute that gold, normally considered a safe haven investment instrument in uncertain times, has lost close to 20% of its value in the last couple of months. That at a time when uncertainty was at its peak. It is possible to explain the phenomena to excessive speculation in the past but here again the unloading for the purposes of generating cash could be reason.
One of the significant issues that are bound to surface in the next couple of months is the acceptance of Euro! The emergence of a single European currency to counter the dollar is now going to be put to acid test. The foundation of the Euro as a currency is based on the compliance to an agreed macro economic discipline. These are bound to be questioned by nationalists in countries and incumbent governments may be under pressure to take populist decisions that are contrary to the Euro norms! One, therefore, should not be surprised if we see the re-emergence of the dual currency norm in the next couple of months!
As has been rightly said, the DNA of the world is about to change. So let us all brace up and tighten our seat belts for turbulent weather and heavy landing.
Wednesday, September 24, 2008
9/11 to 7/11 - Destruction of Towers
There is such an eerie similarity in the numbers, not totally though, but atleast in the manner it rhymes while saying it. The memories and the macabre pictures of that terrible tragedy of September 11th 2001 are far too vivid to be forgotten in a hurry. The death and destruction to innumerable families, and more critically, the realization of vulnerability, to a nation that for a moment stood stunned in silence, virtually sent shivers down the spine of public consciousness all over. The crumbling of the Two World Trade Towers overnight was as much symbolic of dangers that lurked around for the strongest of civilizations, as it was a paralyzing moment of truth, for those who lost their near and dear, all in a jiffy.
The month of September 2008 has brought about another similar disaster this time on the global financial sector. The seven eleven represents the financial disasters in USA that has caused a financial tsunami leading to a global meltdown - the filing bankruptcy applications by financial giants under Chapter Seven and Eleven of US Bankruptcy laws.
The Nine-Eleven tragedy was on account of fundamental extremism this time it is fundamentally due to financial extremism. Both the tragedies happened in an economy that had supreme confidence in systems that was replete with jargons and acronyms! It is classic case of supreme confidence to the sub-prime to the submerged!
The collateral damage that these events have brought on the system the world-over is enormous. Typical of the nine eleven tragedy – though it was the Twin Towers that fell, other edifices symbolizing the psychology of confidence of people in the U S also fell. It was also followed by a traumatic period of insecurity for the entire world. Likewise, the bankruptcy of a couple of major entities in the U S would carry far-reaching implications to the entire monetary apparatus of the world, leaving behind it ,a long trail of terrible doubt and insecurity in the international financial arena.
For such of those are not upto speed on the USA bankruptcy laws, here is what it means - When a troubled business is badly in debt and unable to service that debt or pay its creditors, it may file (or be forced by its creditors to file) for bankruptcy in a federal court under Chapter 7. A Chapter 7 filing means that the business ceases operations unless continued by the Chapter 7 Trustee. A Chapter 7 Trustee is appointed almost immediately. The Trustee generally sells all the assets and distributes the proceeds to the creditors. This may or may not mean that all employees will lose their jobs. When a very large company enters Chapter 7 bankruptcy, entire divisions of the company may be sold intact to other companies during the liquidation. Fully-secured creditors have a legally-enforceable right to the collateral securing their loans or to the equivalent value, which right cannot be defeated by bankruptcy. A creditor is fully secured if the value of the collateral for its loan to the debtor equals or exceeds the amount of the debt. For this reason, however, fully-secured creditors are not entitled to participate in any distribution of liquidated assets which the bankruptcy trustee might make. On the other hand in the case of chapter 11 filing is usually an attempt to stay in business while a bankruptcy court supervises the "reorganization" of the company's contractual and debt obligations. The court can grant complete or partial relief from most of the company's debts and its contracts, so that the company can make a fresh start. Sometimes, if the business's debts exceed its assets, then at the completion of bankruptcy the company's owners all end up without anything; all their rights and interests are ended and the company's creditors are left with ownership of the newly reorganized company. Either way as far as the company is concerned it is a closed chapter!
It is time that the industry and regulators understood that it is not enough that there is an act in place but the discipline has to come through the implementation of sound processes. We are familiar with B2B – starting with the Boom to Bust of .com companies, then onto realignment of business practices on Business to Business channels but now it is time for Back to Basics!
To begin with we might as go back to what the Americans so passionately refer to as “KISS” – “Keep it Simple Stupid”. The next, it is not enough if you have SOX but it more important to have BOOTS – Build Operate Operationally Transparent Systems. In an endeavour to create technology savvy organisation we have created technology monsters! Go to any organisation and don’t be surprised if they claim that they have expert systems... As a wag once put it, an expert is someone who knows more and more about less and less until, eventually, he knows everything about nothing. The modularisation of business processes based on highly complex technology applications has meant that invariably very few people are aware of the process in its entirety. The unscrupulous are bound to exploit the information vacuum that is created in the bargain. By no stretch of imagination is one suggesting that technology does not provide controls on the contrary, sometimes, it has so many that transaction is never understood in its totality and relative implications less understood!
Though the current situation represents the collective and cumulative failure of all concerned the law makers, regulators, corporate boards, independent professionals but as the same time we need to recognise that business organisations cannot be run on based on audits, external ratings and regulatory policing but sound internal systems. The Reserve Bank of India has rightly expressed concern over excessive dependence on external credit rating agencies by lenders. The banking regulator has recently expressed apprehensions that it may not be prudent to rely only on these agencies, given the current context in the global economy. These views were expressed as recently as July 2008 and how true it has come! Take the recent cases of AIG in America where a couple of rating agencies down graded the commercial papers a couple of days before the company was taken over. It literally was the proverbial bolting of doors after the horses had bolted! To think of it, even there it was only downgraded to an A –ve which still represented an investment grade when the company was literally in the doorsteps of a run and bankruptcy. The credit rating mechanism has been truly and surely exposed as a shallow exercise in the current context. These rating organisations have got to go back to the drawing boards and reexamine their whole rating process and mechanism.
Time has come for all organisations to have critical relook at their corporate practices. It is time that organisations are run based on strong trust based value systems addressing all facets of governance, risk and compliance. One does not necessarily have to ape the west for everything, we could learn from their mistakes. Let it not represent a situation where you ape someone and get monkeys. Let us not go overboard in the name of independence. Independence is not a qualification it is a state of mind. India has a had its own share of corporate and financial scams where the quantum of monies spent on investigations and committees have in some cases far exceeded the value of the purported scam without even having identified what the problem was.
It is time to ponder, analyse, take actions, and above all create a sense of values in business dealings. It is not just the recent shocks in the financial systems, but even the not so distant happenings around the Enrons and the Andersons, that bear strong evidence to confidence going overboard, and basic discipline in systems and time tested business principles, taking a serious knock. History, they say, repeats itself, because people repeat their mistakes. Can this big price we have now paid, be an investment for a stable tomorrow? Some serious points for introspection.
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