Tag: Business

No risk, No return

Prasad AjinkyaLeave a comment

Or No pain, no gain … the adage holds, is what empirical data says. A working paper by Harvard Business School presents its findings on human capital, performance incentives and ownership models.

Do different kinds of firm ownership drive the adoption of different managerial practices? HBS professor Raffaella Sadun and coauthors focus on the difference between the two most common ownership modes, family firms and firms that are widely held, namely that have no dominant owner. They find that the greater weight attached by family firms to benefits from control induces a conflict of interest between family-firm owners and high-ability, risk-tolerant managers. Key concepts include:

  • Family firms systematically offer low-powered incentive contracts to external managers compared with widely held firms. The differences are economically large.
  • Where incentives are more powerful, managers exert more effort, are paid more, and are more satisfied.
  • Firms that offer high-powered incentives are associated with better performance. This result holds even after controlling for the type of ownership.
  • Economies where family firms prevail because of institutional or cultural constraints are also economies where the demand for highly skilled, risk-tolerant managers languishes.

What this study suggests, is that to have high performance managers, organizations should employ the high powered incentives (this may not be as simple as cutting the current CTC of an individual into fixed and variable components). The last finding suggests that economies (and even societies) where family firms are prevalent (take Marwaris or Sindhis), the risk-appetite may be lesser. The first set of findings is also interesting since it is related to satisfaction.

So the next time you are considering a job, maybe these tips might help you evaluate that job slightly better –

  1. Is there a variable component, is the calculation of that component completely transparent?
  2. Will you be empowered enough to take risks and get the job done?
  3. How mediocrity based is the leadership? (As in, is the leadership attracting the best talent, or the talent which can be ordered around)
  4. Is your work ecology risk tolerant Or does it always stick to the safe path?

Are Corporates anti-women?

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A friend’s company recently published this article on Harvard Business Review. Here’s an excerpt –

New research by our firm, Catalyst, shows that among graduates of elite MBA programs around the world—the high potentials on whom companies are counting to navigate the turbulent global economy over the next decade—women continue to lag men at every single career stage, right from their first professional jobs. Reports of progress in advancement, compensation, and career satisfaction are at best overstated, at worst just plain wrong.

The report stated that there is not much correlation between child bearing and career growth for women, there was not any significant indicator as to why women are at a junior position v/s men on the same career path. The only indicator which showed bias was the entry roles offered to women, where they had to prove their worth to the organization before being taken for higher roles (10% women were accepted at higher level roles v/s 19% men were accepted at higher level roles).

To know more of the scenarios that is in corporate India, I did some secondary research (read googling) and came with some interesting articles. This one says that the condition of women in India Inc. is no different, some excerpts –

Surprise? Not really, as experts say that a bare three per cent women occupy senior positions in private companies across India. And most of the companies only have five to six per cent women employees. What is more, a national daily quoted Pallavi Jha, former chairperson of the Confederation of Indian Industry (CII) (Maharashtra Region) as saying; “A study on women graduates of the Indian Institute of Management, Ahmedabad, showed that more than 70 per cent do not pursue a career.”

A study conducted in 2007 revealed that this discrepancy is not only observed in the lower echelons of company management, but even more so at senior management levels.

Out of the 9,000 people on boards of the BSE-listed companies, only five are women. Indian companies seriously lack women in senior management roles, HR consultants say.

If one has to change this, then who does the responsibility lie with? The women to achieve more? The men to give women a fair chance? The organizations to level the odds for both the genders? The education system? Or the society to change their mindset?

Age of the Game Cloud

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It was the summer of 2005, I was in the quest for knowledge in the mostly empty libraries of IIM-Indore. That’s one of the main reasons to be there, if you don’t want to be disturbed, then the library is for you … nobody goes there :-)

I found Soft War by Larry Ellison. It was an interesting read, but throughout the book, there are potshots at Microsoft and the personal PC concept. Oracle says that the era of the personal PC is over and its time everything moved onto the web with machines as dumb terminals. Although I agreed with most of the things he was saying, I could not fathom how could the PC fade into oblivion? One of the main reasons why I thought this not possible was because of games. As a gamer, I thought that PCs are here to stay, games require too much hardware support to have a successful online game.

Five years later, I stand corrected and oh so much humbled! With games like WoW, 9 Dragons, Silkroad, Eve Online, League of Legends, DotA, most of the game titles which we know are planning (if not already) a MMO version of their game. What really makes sense to the game companies is the ease of distribution and control they get over the piracy that soon ensues after a successful release. Add to that a pay-per-use business model that is inherent to the cloud architecture, and organizations really stand a chance to make a thriving profit. I am thanking the stars because creators are looking at replayability as one of the critical success factors in making an MMO.

I still have some nagging doubts about the cloud (I guess because of a higher lower total cost of ownership), but its there to stay, for games to go online and create a variety of possibilities. I wonder when people will start having company reps within these games ala social media.

Update:

Read this post after 7 years. This is now a reality, so many games are running on the cloud and require you to be online these days.

The e-Commerce conundrum

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I walk into a brick and mortar store (say a book store), browse through some books, finally decide on my selections, head to the counter, make the payment and come out a happy customer. All that the vendor needs to do here is –

1. ensure that he is well stocked with books I like
2. have a search mechanism in place to find the right book for me
3. have someone manning the counter

The beauty here is that if the book were torn or something, I do get a chance to examine the goods before buying them. I decide to buy the goods only after I say its ok, who would I trust more than myself? Thus, I perceive the transaction as fair, and I pay the book store and head home.

Now consider a second scenario, I walk into a bookstore, and I inform the vendor that I am looking for, say a Jack Reacher novel. The vendor shows me his collection, but much to my chagrin the particular title I am looking for is not with him. The attendant assures me that they have run out of stock and will restock in 5 days. However, they would be more than happy to inform me once the book arrives. I hesitantly leave my no. with them and think that it’s good to have book stores who inform their customers about books they want.

Apply the same paradigm to an online shop. Rarely would I come to this shop for idle browsing, if I do have a title in mind, then I would be interested in skipping directly to it. If at this juncture, the store informs me that it is out of stock and will not accept my order, however they will be more than glad to inform me when the book is in stock – I won’t be that pleased. I will grumble and grudgingly close the browser.

If the decision making involvement is the same, if the outcome is the same, then why the difference in behaviors?

Self-Esteem v/s Employability

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While at work today, an interesting discussion cropped up. Whether there is any correlation between Employability and Self-Esteem. Although a lot of work has been done on these two topics independently, I could hardly come up with anything which tied these two together. Interestingly, many firms have tried to come up with Employability Index and Self-Esteem Index, so why not see the behavior of these two?

Before we laugh off Wally, I want to say at the highest point of Employability, the Self-Esteem is the true identity of the individual’s skill sets. It is very difficult to find people like these, whose estimate of their self-worth is equal to the actual difference they make. I remember a study that I had participated, in a sample size of 40 individuals, only 2 of them were close to their self-worth, the rest either thought very highly of themselves or undersold themselves.

Where would you choose to be?

Futurebazaar

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In December 2006, we were working on an e-commerce portal aimed for the B2C segment. It was supposed to rival Amazon in terms of features, experience, technology … a very ambitious project. When doing market research for that project, we tried out many Indian e-commerce sites, actually shopped on some of them, and literally choose from the best of them the features we want to build. That was the first time I came across Futurebazaar. I bought a book, (Shantaram) from the site, the book was delivered in a week or so. I soon forgot about the site, little did I know that I was one of the first customers on the portal. Within a month or so, I got a mail from them saying so and also an invitation to their public media launch. Wow! My first media launch invitation!! Wheee!!

I look at the site now, almost 40 months later, and I can see how well they have evolved. No more the tacky-looking nested menus, distinct spaces which map onto their physical presences, interesting sales promotions (Lucky Wheel thingy), only products which they stock in their physical stores, support offered through their physical stores, etc. The way they have evolved their business from being a pure play online shop to a click and brick model is to be applauded.

Kudos to you Futurebazaar!!

Independent thought

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Stock Photos
Shine on

This post by Seth Godin made me think.

People are just begging to be told what to do. There are a lot of reasons for this, but I think the biggest one is: “If you tell me what to do, the responsibility for the outcome is yours, not mine. I’m safe.”

Whenever you are working with people, how many times have you had to think for everyone else? Everything looks hunky-dory and people seem to be listening to you. But do you know why they are listening? Because that way, they do not have to think, because then they are not responsible. When sh!t hits the ceiling, it will be most likely you who would be doing the clean up.

Try what Seth says, the guru is right. Refrain from telling them what needs to be done. Let your team struggle, let the people take up the mantle. Some of them will start liking being independent. Foster and nurture these pieces of independent thought, and you have a sustainable knowledge practice up and running.

A lamp in pure darkness is bright, but its not as bright as a lamp and 3-4 flickering sparks.