Dr. Frank speaks on Indian Economy, Development, Globalization & Trade
Dr. Frank-Jürgen Richter, Chairman of Horasis says Mr Modi, from day one as Prime Minister, has courted overseas investment and has become an integral member of Asian and Central Asian forum that extends to other leaders the aims and aspirations of Mr Modi and of India Inc. External links are tenuous and demand a strong home base. Initially India did not have this, but now its middle class and its interregional trade is flowing (in part due to GST and the wish of State Ministers to cohere and follow the Make in India philosophy).
Interview of Mr. Deepak Khattar, Bureau Chief with Dr. Frank-Jürgen Richter, Chairman of Horasis. Business Sphere (BS): In the context of the globalization, what are your views on the diversity in a workplace in most companies these days? Since the employees can come from literally any part of the world, is it a challenge to manage the diversity of culture in any given work environment? Dr. Frank-Jürgen Richter (DFR): There has often been a division of labour – women cleaning and salting fish in the harbour buildings while the men were at sea catching the fish, for instance. But is modern, mass production we tend to think that a man or a woman could undertake any job – but men often resist that notion. In Europe during the last World War it was necessary for women to take over many of the jobs once undertaken by the men now were conscripted to military service: after the war the men returned disgruntled to find women doing ‘their rightful’ jobs. Curiously in modern military service many Generals refuse to allow women serve on the front line: we have a strange asymmetry when considering inclusiveness and diversity. I feel given equal education men and women usually qualify equally – though sometimes there is a reasonable argument that ‘in general’ as men are often stronger than women that may be more fitting for certain jobs, like fire fighters. But this is not an absolute argument. In the business context there has to be equality. A second difference arises from cultural clashes. We have all been raised, first at home, then in our local schools and colleges. Then potentially we might be further educated in a different nation’s university when we will fully meet multiple cultures and attitudes different from our own. Then we learn that when hurt either physically or mentally we react differently, potentially with alarming differences. It is then we must learn to understand why we need to compromise while studying our own reactions. One role of the CEO is to mentor and teach his/her staff how to behave. To set the rules and explain why these need to be followed in order to bring harmony and trust to the workplace. This is challenging in multi-national firms who must not only employ the well-educated, but ensure these people are not predators
in any sense on other staff: hence my suggestion that the CEOs must lead the mentoring of behaviours. All nations have their cultural identities which are displayed when angry or frustrated, and individuals will gang together to provide ‘solidarity’ to right any perceived wrongs derived from cultural or gender differences. BS: Which are the challenges which leaders of companies face in the present day environment when job-hopping is a very common phenomenon? What are the various measures which can be taken by companies to reduce employee attrition? DFR: I hinted above that firms of each nation carry a national culture observable it its staff’s behaviour. This attitude has been seen to grate upon the take-over firms, initially observed widely in the 1970s onwards when Japanese firms expanded into the US and Europe. It took maybe five years for local staff to appreciate and work with their Japanese senior staff as the culture of Japan and thus its workplace behaviour and expectations was greatly different from the average US or European firm. Until one lives with such differences day by day and thus learns of the frustration of being unable to guess why one’s colleagues react as they do the understanding of the situation is merely an academic exercise: the acculturalisation is lengthy. Taking educational courses in other nations, working for multi-national firms and receiving directed job rotations all contribute to one’s multicultural skills; and so does a fluency in other languages. A concerned Human Resource department will ensure that job rotation does not lead to attrition which becomes a costly outcome as a new staff will require retraining. Again, referring to the Japanese multi-nations of the 1970s onwards, their HR departments guided their senior staff through multiple appointments in their subsidiaries in different nations while all the time giving them promotions – both abroad and in intermittent sojourns back in Japan. It is not a perfect, nor only solution, but the [anonymous] firm and the [personal] individual must confer about joint development to fit the individual’s skills to the firm’s needs. It is vital in these modern times of
highly integrated globalisation to ensure our staffs understand each other’s nuances. Thus inter-cultural education and guided staff rotations become a serious concern – not only for western firms but increasingly for Asian firms investing overseas for the first time. BS: Employee engagement is a term which is used very frequently these days. The employees need to be engaged fruitfully in whatever they are doing for them to be satisfied with their work profiles? What can leaders of companies do to ensure healthy employee engagement? DFR: Essentially to ensure they match job descriptions with the employee qualifications. Too often we find lazy job descriptions that demand a university degree for every task. This implies the senior management have not thought through the needs of the jobs and its tasks – to question if a degree really fulfil the task needs: not every driver needs a PhD in astrophysics. Being over-qualified leads to as many frustrations as under qualification when colleagues note that they have to support one too often. It was a not too amusing concept derived by Laurence J. Peter, which observes that people in a hierarchy tend to rise to their "level of incompetence". In other words, an employee is promoted based on their success in previous jobs until they reach a level at which they are no longer competent, as skills in one job do not necessarily translate to another. Therefore to answer the question – it is vital the HR department educates the managers (ie the CEO) to not demand the highest possible academic qualifications for each task and that the HR department fully evaluates each job opening to understand who could best fill the post and how that person might be developed with further academic qualifications or skill training for the mutual benefit of the individual and the firm. BS: Sustainable development is the call of the hour. We all know and understand this fully well. What are the measures which companies should take within their manufacturing or even servicerelated cycles to ensure sustainable development? DFR: Actually I am not sure all managers do understand ‘sustainable’
or the concept of recycling through cradle-to-cradle program. Take the smartphone as an example. According to Friends of the Earth and the Minerals Education Coalition at least 70 of the 83 stable and nonradioactive elements in the periodic table can be found in smartphones. Something like a total of 62 different types of metals go into a handset, with rare earth metals (a specific set of elements in the periodic table) playing an important role. For instance, neodymium, terbium and dysprosium help the phone vibrate; and both terbium and dysprosium are used in tiny quantities in touchscreens to produce their vibrant colours. These elements are not necessarily ‘rare’ but are often found highly dispersed – they are difficult to extract and energy-intensive to refine. Trashing in land-fill is not at all sustainable. Thus customers (perhaps following fashion trends), vendors (trying to make a profit), and manufacturers (requesting designers make their processes simple) are all at fault – the miniaturisation process means the components cannot be easily unpicked for recycling. And a clunky-looking phone would not sell. In fact the concept of sustainable development derived from the Brundtland Commission of the United Nations on March 20, 1987 who quoted "sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” And it is that commission’s viewpoints that have led to many of today’s grumbles against our government’s impositions about insulation in homes and factories, minimising waste, and being “ecological”, etc. Thus ‘sustainable’ has become so over-used that to some extent it has become meaningless. The concept is not meaningless however. And to meet its objectives companies must carefully analyse all its operations from acquisition of feed-stocks (and to question if its suppliers also follow sustainability concepts), the design of the firm’s goods to allow end-of-life recycling, the recycling of resources in the firm as well as minimising energy use, and moving the goods to customers must be done using logistics providers who are sustainable. BS: The entire ethos behind
corporate social responsibility seems very important for companies to have a good reputation in their chosen niche arena of operations these days. What is your take on CSR and the role it assumes in the context of doing business? DFR: I feel that CSR, like ‘sustainability’, has been overused. And as above, CSR is a very useful concept and when practiced carefully ensures a firm through its normal business operates in ways that enhances society and the environment rather than having a negative impact. The firm ‘Starbucks’ is often cites as a great example of CSR in practice as it sources ethically costed coffee from its global network of farmers, it has created colleges for its employees and hires migrants offering the reality of a job rather than only hope as well as reducing the environmental impact of its detailed operations. But rather like my response to Q1 and Q2 above, CSR is culture dependant and thus demands a global education program to ensure its even application according to the ethics of each multinational firm. This is echoed by the International Standard ISO 26000 that offers guidance on CSR rather than rules to enable effective applications in different parts of the globe. I wrote several years ago “CSR – a virtuous circle. But which circle? And whose ‘virtue’?”Such thoughts are still applicable. BS: Kindly give us a snapshot of Horasis and its vision, mission statement, and basic goal for the near future? DFR: The Horasis Global Meeting hopes that the discussions by government leaders, CEOs of multi-national enterprises and civic leaders will create a ‘road-map’ to outline potential ways forward that will ‘Inspire our Future’. Many of these leaders have a long history of governing through turbulent times as they have honed their skills in highlevel jobs in firms located across the globe. They understand inclinations towards protectionism, comparative advantage and systemic planning for the long-term while working in the here-and-now in a variety of cultures, each with their norms and geo-political expectations. These leaders are not passive entities, and I hope together they will create an Inspiring future Viewpoint developed
from their interactions in the Horasis meetings. Many of our participants attend on a yearly basis – the meeting is an integral part of their annual schedule. We are proud to say that our network is growing – more and more regular participants recommend others to be invited. They appreciate the networking, we feel the momentum. We want to become the foremost gathering of global business leaders and eminent government leaders. We would like to create impact – not through revolution (though sometimes an idea might do just that) but by discussions that educate and which also draw together former opponents. The world has too many active conflict zones – these we can’t halt. But we have a great opportunity through our active network of government leaders, thought leaders in industry, commerce, and in the religious establishment to bend ears and attitudes. It is a slow process but I believe we can prevail and help to develop a richer, more socially aware and peaceful society. Our desired outcome is not one of ‘least controversial’ or ‘lowest common denominator’ but one that absorbs and celebrates the cultural and geo-politic differences that abound. Many international players will be represented at the Global Meeting - they are capable to hearing and understanding the many arguments. Let us hope that a single predominantly national response is not the outcome posited to ‘Inspire our Future’ as we are the people of the world and a global response is needed. We must find a solution to short-termism. Post-Modernism is deemed passé in literature and the plastic arts, but I think the time is ripe for that concept to be applied to today’s globalisation. A new form and structure for globalisation is needed, and it will thrive on the 5G networks, the Internet of Things (IoT) with the aid of Artificial Intelligence (AI) and robotics. It is in this sense that we will approach the 2019 Global Meeting theme ‘Catalysing the Benefits of Globalisation’. In effect, that meeting will explore the Deconstruction and the Synthesising of an emergent form of Globalisation. BS: What are your views on the
current trade scenario in India and in this part of the world in general? Are the initiatives taken by the Indian Prime Minster, Mr. Narendra Modi, enough or fruitful at all? You may have a specific point of view to share with us on the GST regime etc.? DFR: In the recent past India has not had a high demand for resources not available across its own territory, nor has it had a vast external trade with ex-colonies. Now, as the world has become more interconnected through globalisation, India and its people have become a force to be reckoned with. As I have mentioned above its young diaspora are playing a strong role in supporting entrepreneurship in the US and in Europe. It has a few globally recognised manufacturing and service industry firms but it needs even stronger trade and knowledge links. Mr Modi, from day one as Prime Minister, has courted overseas investment and has become an integral member of Asian and Central Asian forum that extends to other leaders the aims and aspirations of Mr Modi and of India Inc. External links are tenuous and demand a strong home base. Initially India did not have this, but now its middle class and its inter-regional trade is flowing (in part due to GST and the wish of State Ministers to cohere and follow the Make in India philosophy). Now, from this increasing strength overseas links will be developed. We see this in the Africa/India/ Japan trade axis – others will follow across Asia to act as a counterbalance against China’s present trade thrusts. It is too early to say, but it is possible that India will form a bulwark of democratic ideas across the Asian region and though its continued growth will be able to show that democracy works, even for nation with a massive population. BS: What does globalization mean for you? In real terms, how has it played a role in changing the face of business operations the world over? Are these changes welcome or they are just some spoofs which we have been seeing over the years and are soon going to fade into oblivion? DFR: ‘Globalisation’ is an overarching and over-used word carrying little precision – yet it provides a very useful verbal summary of all aspects of getting goods or services to the
consumer. Pre-modern globalisation was founded by the Industrial Revolution that called for integrated supply and distribution chains across a region, nationally, and even cross-border that was based on increasing standardisation of parts. No matter where it was made a nut would fit a bolt, and a ploughshare would mate with a shaft. However, truly modern globalisation only occurred after World War Two when containerisation was invented and supply chains became more secure with global reach. But what is ‘globalisation’? It is an aggregation of all the aspects of supply chains linking mineral extraction to refiners, then to fabricators of sub-assemblies, assemblers, and goods finally move onwards to the end consumers. At each stage there are brokers and traders ensuring products are bought and sold priced to market. That is one line of complexity. Other aspects refer to the Laws and Regulations pertaining to quality, verification of ownership, insurance, and so on. And there is the further complexity of the banking and finance industry, often nowadays in this digital age referred to as FinTech, that greases the wheels of trade at each stage and guarantees payments. ‘Globalisation’ is in effect the total concept: the cycle from consumer demand upon raw materials extraction to the delivery of finished goods to the consumer. This is too much to describe frequently, at length – so ‘globalisation’ has become the word of the day, no matter if it describes physical goods or services. ‘Globalisation’ as a concept is not a ‘spoof’ nor is it so in practice. But it creates its own difficulty as there seems to be no beginning or end – like the snake eating its own tail: the Ouroboros of the ancient Egyptians symbolised infinity or cyclicality just as modern globalisation begins from raw materials to consumption and on to recycling. In modern times globalisation aids sustainable management by promoting those who can make what we need more effectively than ourselves: why reinvent wheels? BS: Which are the essential factors for doing good business? What is the message you would like to give budding entrepreneurs about the nuances which they should keep in mind before they delve into the world of business? DFR: Honest business plans must be at the heart of the entrepreneurs’ business. A great idea, if not financed will atrophy and it will not be a target for a take-over (that many inventors desire to make a pile of cash, showing they had good ideas). The business plan allows financiers – ‘Angel financiers’ through to Banks – to gain agood impression of the innovation, its standing in its future competitive world and to understand how the entrepreneur will ramp up growth. Without a business plan the ideas will not be understood by the financial sector, and they will not invest. Naturally the innovator ought to have scanned the globe via the Internet and via friends to see if there are competing products. As I noted above – don’t reinvent wheels (unless they are innovative developments, of course). BS: Start-ups seem to be the key to economic growth and development of India today? Wherever one goes, one hears of start-ups and the role they are playing in making our economy sound and more upbeat. What do you think of the possible future which the start-ups face? More importantly, how do we stand to gain or lose due to them as per economic issues? DFR: Start-ups everywhere are the basis of new industries or services. But for every 1000 only one or two live beyond their early days, and fewer still survive to maturity. And in all economies the vast majority of firms are single person (the owner) or have few employees (five or less): but it is these firms that feed the larger with part-finished objects, even the local branches of multi-nationals that give ultimately a strong economic image of the nation. All start-ups face hurdles – presenting the ideas to financiers, form-filling, being tested by the Health & Safety executive or similar, tested by the tax offices to ensure the correct wages and cash flows are being accounted for… there is a vast amount of work demanded that is not directly associated with manufacturing. The low number of employees can become confused by the variety of demands and their output quality decrease.It is necessary, as Mr Modi has done, to reduce unneeded form-filling and to alter the attitude of bureaucrats to become helpful towards the startup rather than consider it a nuisance – again this is what Mr Modi has demanded of his government officers. The general economy is of concern to the start-up as their payments for work done depends on the viability of larger firms located up the production cycle. If there is a recession large firm don’t have the cash to pay the smaller – or they delay payment to inflate their own bank balances. The start-up does not get cash – fails to pay its own suppliers and workers and becomes bankrupt. These are the first failures of the recession, not the big firms. And such failures can cross national boarders in this globalised world with long-distance commodity and cash flows – a failure in one nation will affect the small scale start-up as cash flows slow. In these cases it is necessary for banks to look sympathetically on offering temporary loans – but their officers must realistically assess risk and take hard decisions. BS: As far as India is concerned, what do you visualize about our economic future in the next five years? Also, the Indian Lok Sabha elections are due next year, do you think the Prime Minster will be reelected for another term? Why, or why not? DFR: I have held India-focused meetings for 10 years. In the early years we became inured to many Indian politicians and business people stating “India is growing, just give us time”. During the 10th meeting in Malaga there was a palpable change – India is seen to be emerging. There was a feeling, both qualitatively and quantitatively that its hopes are now being translated into realities. This is apparent, not only at government and business levels, but at lower levels of its society as it has become supported by the vast digitisation changes ordered by Mr Modi. However, in line with all democracies, the initial positive support for the Prime Minister has fallen as time progressed during the parliamentary cycle. Some think Mr Modi might have to search for a coalition to continue as leader. I cannot forecast the election outcome next year – but I hope Mr Modi remains as leader to fulfil new efforts to bring India to the forefront of the global economy.