it-s all about good leadership

Publication: The Economic Times Mumbai;Date: Dec 30, 2010;Section: Policy;Page: 13

It’s all about good LEADERSHIP

Irrespective of the business environment, how a companyperforms depend mostly on goals and aspirations of itsleadersTridibesh Mukherjee Sumitesh Das

IT IS amazing how dissimilar are the ways in which managers set their targets in different countries. Even theperception of a target differs. The process of setting targets reflect company culture. There is enough evidencenow that this could also predict the future of the company. Since managers are products of a country’s culture,and companies together have an overwhelming effect on the economy of the country, it is important to appreciatethe far-reaching effect of the managers’ mindsets.

Admittedly, this cannot be generalised, but consider an illustrative example. In a reasonable and reliable studyof the market, the competitor’s ability and other relevant parameters suggest that the target should be 100. In adeveloped country such as the UK, where the bonus and other earnings may be tied up with achieving the target,the tendency may be to set the target at 90. Managers who take a pedantic view of total quality management(TQM) will take 100 as their target. In developing countries such as India and China, aspirational managers andothers will be encouraged to set it at 110.

All three targets will be rational in the prevailing company cultures. Achievement of 90 as target is a case ofsatisfactory underperformance. A company continuing thus will get into a vicious cycle and perish in an openmarket, as have many such companies in western Europe and the UK. Achievement of 100 as target could besatisfactory and even good in an open economy with no major competitor aspiring to achieve 110. Unfortunately,the situation in the real world is never such, as many Japanese companies have realised.

Those who have set themselves a target of 110 experience a self-imposed creative tension. They have to find away but they do not know how. Not just hard work but innovation and determination will be essential. Suchaspirational companies are placing themselves in the virtuous cycle that will propel them to the top of theirbusiness space.

The satisfactory underperformance choosers, being aspiration deficient, often become extinct. Till 50 yearsago, the British automobile industry roared to the sounds of such brands as Austin, Morris and Rolls Royce. TheUK was then the largest exporter of automobiles and the second largest car producer, next only to the US. Today,the British automobile industry is whimpering. The largest car producers in the UK are from Japan, Germany,America and India, namely, Nissan, Toyota, Honda, BMW, GM and Tata. The fault lay not with the workers; theBritish workers are still producing the cars. It is the leadership of the British companies, of the trade unions andthe government that did not display any aspiration to remain at the top. We can call this group, where leaders arelow on aspiration and are willing to give up, ‘living fossils’, should they still be living.

The prevailing state of affairs in these highly developed welfare states appears satisfactory, so much so that noone has the urge to propose, explore new ideas or question the status quo. Such an environment cannotencourage innovation. On the contrary, leaders in a state of satisfactory underperformance will retard, if notpreclude, any trials to develop radically innovative ideas. The last thing one can expect in such a stiflingatmosphere is innovation!

Many large technology-led companies like Microsoft, GE, Timken and Vodafone, among others, have set uptheir research and development facilities for their next generation products while also trying out innovativebusiness delivery models in India. The ostensible reason is cost, but the aspirational attitude and mindset of theyoung talents in India may have contributed to swaying the decision in India’s favour. Companies such asMicrosoft or GE are not ‘living fossils’ and the steps they have taken to incorporate the high degree of aspiration ofdeveloping countries into their business strategies may well ensure that they do not fall into this category.

12/30/2010 It’s all about good LEADERSHIP

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Companies targeting 100 out of 100 are to be seen in the US. For instance, former world leaders that arelanguishing today such as General Motors and US Steel. Sans visionary, aspirational leaders who can radicallytransform things, this space is led by ‘tired leaders’.

In Japan, Sony’s co-founder and president, Akio Morita, had a fight on his hands when he came up with theidea of the Walkman. The fight was with his own executives, who could not believe that a tape player without therecording function could succeed. Morita had vision, determination and was the boss. Today the ‘salaried sacho’(hired-hand presidents) do not display the same pioneering spirit. They lack “assertiveness, vigour, energy andresolve“ and, probably, caused the downfall of the Japanese economy.

It is possible that the ‘hired-hand presidents’ do not enjoy a free hand and are expected to run the companysmoothly. A pedantic understanding of the successful

Japanese management technique, TQM, can also bring in stability rather than breakthrough innovation and newWalkmans. It is not surprising, therefore, that Sony has Sir Howard Stringer as the boss and Renault-NissanCarlos Ghosn. The current performance of such companies that have taken a bold decision by Japanesestandards indicates that there are ways of overcoming the “tired leader“ syndrome.

Finally, those targeting 110. Over the last two decades of economic liberalisation, several Indian companieshave lost their dominant market position to cheap imports. In some, the leadership resolved to face the challenge;questioned the unquestionable; benchmarked its products and processes with the competition; brought aboutsignificant direct improvement in its manufacturing; and successfully competed with the competition. Thesesuccessful companies did not have time for new equipment or trained workforce. Thrown into the competitivevortex, they ratcheted up the innovative spirit of their employees to beat the competition using the samewherewithal.

Consider, for instance, the transformation of Tata Steel. Chairman Ratan Tata encouraged innovation by settingapparently impossible targets and provided moral and psychological support that motivated team Tata Steel toreach the target. This was a self-imposed situation prompted by a liberalising India. The living fossils woke up,questioned the unquestionable and responded to the challenge and propelled India into a high-growth territory.This was followed with the investment in the latest technologies, by both incumbent and new entrepreneurs,making the growth path secure for many years. Once again, leadership made the difference. There were someleaders who could not figure out how the competition supplied at unbelievably low prices to India and waited for theinevitable to happen. Business leaders in India will do themselves and the nation a disservice by scaling downtheir ambition to suit the ‘environment’. The environment, actually, demands that they be very ambitious.

There are, however, situations in which gifted and spirited business leaders struggle to make a dent because ofan unsupportive environment. Policies, mired in patronage and corruption, do not support the entrepreneurial spiritof such leaders. L N Mittal, the largest steelmaker in the world, who built his empire from scratch, faces delays inexecuting greenfield plants in India. The Tata group had an excellent proposals to manufacture steel inBangladesh. These could not fructify in the unsupportive ambience. These ‘desert sprinters’, as we may call them,will look for more suitable tracks to sprint. West Bengal is a classic example creating an environment thatpersuades home-grown entrepreneurs like Mittals and Jindals to move away. Herculean efforts will be needed tobring them back again. The responsibility of providing the nourishing climate rests squarely on the political andintellectual leadership.

Often it is the leadership of an individual or of a team that sets the aspirational level in a company and drivesthe innovative streak. Edison adopted a needs-first approach to innovation. His quest for a sustainable “arc of light“took around 20,000 meticulously recorded experiments and produced an arc that lasted 40 hours. This innovationmade the entire gas-lamp and wickers industry extinct. Henry Ford’s Model T was born of a business modelinnovation of building cars for the American masses using a production line process. Kiichiro Toyoda’s ‘Just InTime’ concept was prompted by an aspiration to make quality cars in Japan. This concept revolutionised quality.Ratan Tata, as Edison, Ford and Toyoda, inspired teams to success. Their countries provided the businessenvironment for them to flourish.

Such companies as GE, Toyota, Caterpillar, Komatsu, Volkswagen and Bharat Forge embody manufacturingexcellence that their leader, or a succession of leaders, nurtured. Here entrepreneurship flourished in an extremelycompetitive ambience. These are ‘radiant’ companies, gifted with aspirational leaders that thrive in a competitivemarket ideal for entrepreneurs.

Entrepreneurs are the spark of an enterprise; their aspiration provides the driving force to prosperity. Many suchenterprises together make a country prosperous. India has many such ambitious entrepreneurs whose venturesneed to draw its nutrients from society at large: a nourishing ambience provided by the government, political



leaders and union leadership.

An enterprise in a supportive business atmosphere, led by an aspirational leader, becomes radiant. A radiantcompany in the absence of these pillars may become a living fossil. Success will elude proven entrepreneurs in abarren business ambience; they will be better off in a more nourishing atmosphere. A radiant enterprise may alsolose its radiance in the absence of youthful vigour and aspiration; it will do well by an ‘inclusive’ strategy involvingaspirational youth from any geography.

Entrepreneurship and nourishing business environment together create the winning platform.

T Mukherjee is former deputy managing

director (steel), Tata Steel, and S Das is chief

(global research programmes), Tata Steel



it-s all about good leadership

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