January 27, 2009

Employee Attrition - By Sanjay Anandaram

I received am email from the CEO of a company that had just lost a few employees. These ex-employees had apparently started a competing company. Here’s an extract from the CEO’s mail:

“ Why does this happen? Another example is Wipro… there are so many ex-Wiproites with their own companies now. I also know of an education institute called Vignan in Guntur, Andhra Pradesh. Today there are at least 10 similar sized institutes, which are started by ex-Vignan staff.
• Does it happen because employees don’t get to grow in their companies? But this may not be true in Wipro?
• Does it happen because employees have seen the 360 degree of running a company and are now confident?
• Is it good for the companies?
• Should we take measures to stop this happen to us?”

Well, people leave their jobs for multiple reasons – emotional, professional, social and economic. What do employees seek in a job in the first place? Various studies have been conducted that generally converge on the following needs of employees: opportunities for responsibility and challenge as well as to develop themselves professionally. Career opportunities for growth are therefore critical. Of course, the pay has to be fair but buying people’s “loyalty” through high salaries is not necessary or even good for the company or the employee. This in turn means that the company must be grow in order to provide opportunities for its employees. Career development opportunities are also critical in that they help employees enhance their capabilities and marketability. Training and counseling are therefore important inputs that need to be provided.

Leadership needs to constantly communicate with their employees in a transparent manner, develop trust and confidence through the framing of fair and friendly policies and more importantly in their honest practice without compromising company productivity and performance expectations. These could range from having flexible working schedules to policies that support education enhancement to health benefits to even dress codes and time-off for self and family affairs. But communicate what? Communicate the company’s culture, goals, performance, and plans. Enlist employee involvement in problem solving, in securing feedback and getting suggestions. More importantly, the feedback and suggestions need to be acknowledged and acted upon in an honest manner.

There are many companies that seem to regularly lose management talent but yet continue to grow. The secret lies in the ability of these companies to create top class management talent across various tiers of the company. They provide both career advancement as well as career development opportunities. But why then do people leave? People leave when they perceive that the sound background and experience they’ve acquired can be better monetized outside the walls their current company. When they wish to be the masters of their own destiny through the pursuit of entrepreneurial ambitions. When opportunities for career advancement are no longer visible. When a company starts to lose its connection with its people. Mentoring, counseling and development of employees therefore need to happen on a continuous basis across the company by all managers.

Now, should companies prevent the leaving of all employees? Of course, losing a trained employee is a loss to any company; however, it is a good practice to let go off people who just don’t seem to fit with a company’s culture and value system or who just can’t seem to deliver in spite of opportunities and chances provided. But what of the others who wish to leave?

I don’t believe it is worthwhile to force an employee to stay if his/her mind is made up. On the other hand, when good employees move, they stay in touch with their former colleagues. Employees don’t necessarily join competitors but leave to join customer companies, suppliers and partners. These relationships help in establishing new business possibilities in sales, outsourcing contracts and even M & A. According to an article in the May 2008 Sloan Management Review “Rethinking the War for Talent” the authors say “…social capital created by the movement of employees across companies can be a key source of competitive advantage.”

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

January 17, 2009

"Best Advice I Ever Got"

Business Today recently had an interesting cover story featuring various entrepreneurs, CEOs and other prominent personalities on the best career advice they have received. I liked the following a lot:

Venu Srinivasan, TVS Motor Company

Take risks but one at a time
“I have received much advice that has had a profound impact on me both as a person and as a leader. My personal friend and philosopher, Prof. Lord S.K. Bhattacharyya, Head of Warwick Manufacturing Group, has had an enormous influence on my growth as a business leader. His advice: never take more than one risk at a time. He typically classifies risks into people, markets and money—three legs of a tripod. If you take more than one risk, the tripod loses balance. For instance, he would say only when you have a strong team and a stable market, can a financial risk such as an acquisition be attempted successfully. In the early part of my life, my father and uncles played an important role in teaching me the TVS values—trust, integrity, discipline.
Aamir Khan, Actor

It’s better to go wrong with your own instincts than somebody else’s
“I think I was around 14 when, during the course of a conversation, my uncle Nasser Hussain told me to follow my heart—and that has kind of stayed with me ever since. Quite often in life, he said, you are faced with situations where you may tend to go wrong— but even so, if you follow your heart, it’s always better to go wrong with your own instincts than on somebody else’s. I believe following this advice has been instrumental in my choice of profession—especially since many of my well-wishers were against it. Their fear was not entirely unfounded…. they wanted me to have something to fall back on in case I didn’t succeed in tinseltown, whereas I was very clear that I wanted to dive right into filmmaking and acting rather than study commerce. Since then, pretty much all my decisions have been based on this philosophy of trusting my own instincts. While I was close to my uncle, I did not seek regular advice from him…. It was my own path and my mistake to live and learn from.”
Nimesh Kampani, JM Financial

Never borrow for personal needs
“For me, it’s my self-consciousness and intuition that have been the guiding force. But I have inherited the value systems and principles from my parents. My father followed the golden principles—never borrow money for personal needs and don’t ever give guarantees. He would always say: ‘The repayment liabilities are yours. You can’t disown them. On the other side, the asset that you believe belongs to you, may or may not remain of that value always. So, the value of assets goes down but the liabilities stay with you. Live within your means.’ So, he would also explain to us by saying: ‘Liabilities are like taxi meters, which keep running 24 hours, even when you go off to sleep. The interest meter runs all the time. If you do business with your own money, you can withstand any bad time.’”
Jinesh Shah of MCX:

Results matter, efforts don’t
“At 24, as a fresh engineer, I had joined the Bombay Stock Exchange as part of a team building the online trading platform. We were all working overtime... I vividly remember an old wooden signboard proclaiming ‘Results Matter. Efforts Don’t’, in the settlement system room where we were given training. These words really woke me up.”

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

Speaker Lineup for APEX '09 Summit & Awards

We are delighted to announce a stellar list of speakers for APEX '09, the Indian Private Equity Summit, scheduled for February 4 at Mumbai. The Annual Summit brings together the cream of the Indian Private Equity/Venture Capital-Entrepreneur Ecosystem to introspect, brainstorm on the way forward and reward its best.

Confirmed Speakers at the Summit include:

Executives & Entrepreneurs

R. Sridhar
Shriram Transport

R. Subramanian

R. Ravimohan
MD & Regional Head
Standard & Poor's

Goutham Reddy
Ramky Group

PE/VC Investors

Varun Sood
Managing Partner

Subbu Subramaniam
Baring Private Equity

JM Trivedi

Sunil Kolangara
Director-Private Equity
UTI Ventures

Senthil Kumar
Real Image

Ishan Raina
OOH India

Service Providers

Rajesh Begur

Click Here to view the event agenda.

For Participation details, email info@ventureintelligence.in or call +91-44-45534303

January 03, 2009

Company Culture - By Sanjay Anandaram

The recent case of Satyam Computers trying to use its cash reserves to acquire the two infrastructure companies held by the promoter’s sons is certainly news worthy. Not because it was an unusual – far from it, especially in India! – but because it was withdrawn thanks to angry protests by shareholders. Corporate governance, ethics and reputation were the casualties in this case.

A friend of mine was till recently a senior executive in a family owned financial services company. He worked long hours, was extremely diligent, cost conscious and highly conscientious. One day, he decided to leave the company in pursuit of better prospects. The chairman of the company tried to talk my friend out of the decision. He was told how well he was doing, how highly he was thought of by all and was offered additional responsibilities. My friend took some time to think through the decision. After 2 weeks, his decision remaining unchanged, he informed the chairman of his desire to leave. Then, things erupted! The chairman started yelling at his senior executive and even threatened to run him off the financial services industry “I’ll see that you don’t find a job in the industry” while throwing in a few colourful epithets.

A senior professional executive was recently brought into a young family owned and managed company. The CEO’s wife routinely assigned “work” to an employee who reported into this executive without the executive being aware of the situation. The executive was naturally very upset.

A few employees recently quit a startup to start off on their own. They promptly joined a competitor and quite brazenly used their log-ins to access the information in their previous company.

I’m sure all of us have many more similar stories to share. The above examples throw up critical questions of culture, ethics and governance. They reflect how we behave, how we react to situations and are a mirror to the larger issue of flexible ethics in our country.

In the first instance, the chairman took the departure of the executive rather personally, as if his departure were an affront to him. His feudal hierarchical mindset could not stomach the idea of someone lower down the pecking order rejecting his overtures. His outburst against the executive is understandable but inexcusable. There was no effort made to understand the reasons for the executive’s departure, his sense of being neglected and ignored. Throwing money at a problem isn’t a substitute for treating people with respect and regard.

In the second case, the lack of governance systems in the company is shockingly glaring. What business does the CEO’s wife have ordering employees around? Her rights as a shareholder do not give her the rights to interfere with management of a company. Again, a combination of ignorance and a feudal attitude (viz. I’m the CEO’s wife) cause enormous grief to competent professional executives. The role and responsibilities of shareholders and management need to be clearly understood.

In the third case, dishonest and unethical employees tried to take advantage of their previous employer – not an unheard of situation! The company did not, obviously, have adequate safeguards to protect its interests. The employment contracts had to be reworked to include a non-compete clause, protection of confidential information and a non-disclosure agreement. The internal systems had to be re-jigged to have passwords of departing employees immediately disabled and so on.

But there’s a larger issue at stake here. One that involves company culture and ethics. Do the CEO and the rest of the leadership team walk the talk? How often does the CEO communicate the company’s vision and culture to all employees - Is there a written document that captures this? Do all employees understand what this means? Is the culture and code of conduct applicable to all employees or to just some employees? What parts of a company culture are negotiable and what aren’t? What happens to a senior executive guilty of violating the code of conduct vis-à-vis a junior employee? Do customers and vendors also fall under the purview of the code of conduct? If not, how is this communicated to them? Is the company, especially a startup, willing to live with the consequences of acting against some of its star employees, major suppliers or major customers on grounds of their having questionable integrity? If there’s a grey area, how will the company react – will it give the benefit of doubt to the accused? Do family members understand that the company is not a personal zamindari or fiefdom to be lorded over and plundered?

At the end of the day, is each one of us willing to stand up for ethics, governance and integrity?

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.