A win-win game

The Smart Manager - - Contents - KANTI GOPAL KOV­VALI IS FOUNDER OF IN­STI­TU­TION BUILDERS, AND AUTHOR OF PIT STOPS FOR PEAK PER­FOR­MANCE AND DE­SIGN­ING LEAD­ERS TO DIS­RUPT MAR­KETS.

Stake­hold­ers must be as­sured of a suc­cess­ful fu­ture for them to stay in­vested in the com­pany, says Kanti Gopal Kov­vali, In­sti­tu­tion Builders.

Busi­ness is not a sport where some stake­holder has to lose or fare badly for oth­ers to do well. Build­ing an at­mos­phere of trust and trans­parency be­tween all stake­hold­ers will help com­pa­nies re­tain them even dur­ing ad­verse times.

It is an undis­putable fact that your stake­hold­ers have an in­ter­est in your suc­cess. They have a stake, and that is why you con­sider them as your stake­holder. Your suc­cess would trans­late into healthy re­turns for in­vestors, qual­ity prod­ucts and ser­vices at af­ford­able rates for cus­tomers, in­crease in busi­ness for sup­pli­ers, and growth with bet­ter pay for em­ploy­ees. How­ever when for­tunes tum­ble and you face a ‘Nokia mo­ment’, cus­tomers desert you, in­vestors give you a thumbs down, and smart em­ploy­ees jump ship be­fore it is too late. Man­ag­ing stake­hold­ers when the go­ing is good is easy. You know it bet­ter than any­one else. How­ever, when the go­ing

gets tough, when your in­dus­try dis­rupts, do you know how to en­sure they stay loyal or help you dis­rupt the mar­ket and be­come the leader again?

The in­ter­est­ing as­pect of our times is that ev­ery in­dus­try and ev­ery com­pany is in the midst of dis­rup­tion. Dur­ing the tran­si­tion phase, when an in­dus­try is ei­ther fad­ing away or pass­ing the ba­ton to a new one, no or­ga­ni­za­tion can be sure about how to in­ter­pret what is hap­pen­ing in the mar­ket right now, or what it might lead to. How­ever, each stake­holder may have a few cues to solve the puz­zle. If all the stake­hold­ers en­gage with the or­ga­ni­za­tion, share mar­ket cues, hunches and un­usual data points, con­nect the dots, gain in­sights, and to­gether de­cide to change—the in­cum­bent or­ga­ni­za­tion can rise like a phoenix from the old in­dus­try’s ash dumps. But why should the stake­hold­ers take all the trou­ble when it is eas­ier for them to just walk away and align with the new stars of a brand new in­dus­try?

They will, if you know how to nur­ture in­vested stake­hold­ers’ who care for your fu­ture as much as you do. Luck­ily it is not all that dif­fi­cult. You just need to bust a few as­sump­tions about stake­holder man­age­ment and ini­ti­ate sim­ple new ways of work­ing.

as­sump­tions to bust

as­sump­tion 01: win­ner takes all

A well-known FMCG com­pany has the pol­icy of cash and carry for deal­ers and pay­ments af­ter 180 days to its sup­pli­ers. Any stock un­sold by deal­ers is taken back af­ter a set time pe­riod and ad­justed against the fu­ture de­liv­er­ies. Need­less to say the com­pany makes a hand­some profit. Their se­nior man­agers take home hand­some bonuses. Now look at it from the deal­ers’ and sup­pli­ers’ per­spec­tive. In a clut­tered mar­ket, they are tak­ing all the risk. What about the sup­pli­ers? These are small com­pa­nies with limited pock­ets in­vest­ing up­front with the hope that they will get paid af­ter six months.

The FMCG com­pany is op­er­at­ing on zero risk by squeez­ing both the deal­ers and the sup­pli­ers. Why would the com­pany’s stake­hold­ers stay in­vested with it when the mar­ket dis­rupts? Why would the sup­plier in­vest in R&D when they are en­gaged in a 180-day fight for sur­vival? Some com­pa­nies as­sume that they can take the big­gest piece of the cake and leave the crumbs to their stake­hold­ers. It works well dur­ing steady pe­ri­ods and fails mis­er­ably when the mar­ket dis­rupts. One can al­ready see the tremors caused by in­no­va­tive new en­trants who are dis­rupt­ing the In­dian FMCG mar­ket through new value propo­si­tions.

No com­pany can gain the trust of their stake­hold­ers by act­ing like a bull in a china shop. Win­ning is not about mak­ing some­one else lose. Win­ning means win­ning to­gether with your stake­hold­ers. When your stake­hold­ers ex­pe­ri­ence this in­tent of yours, they will want to in­vest in your fu­ture.

as­sump­tion 02: align­ment de­serves an ‘A’ rating Highly achieve­ment-ori­ented se­nior lead­ers love ‘yes boards’ and ‘yes em­ploy­ees’. Af­ter all, these se­nior lead­ers have a clear vi­sion and strat­egy. They need boards who as­sure sup­port and look the other way when things do not seem to go as per plan.

Align­ment is over­rated in com­pa­nies. Pro­fes­sional man­agers value loy­alty. They be­lieve that they know what to do, why to do, and how to do. They need a few wise men and women to put their stamp of ap­proval as re­quired by the Com­pa­nies Act. Sim­i­larly, they need ma­chines and wher­ever un­avoid­able, hu­man be­ings, to ex­e­cute their plans. Ques­tion­ing and chal­leng­ing strat­egy or ways of work­ing is deemed un­pa­tri­otic.

When boards and em­ploy­ees stop think­ing, they cease to be stake­hold­ers of the or­ga­ni­za­tion’s fu­ture. Such board mem­bers and em­ploy­ees play safe by leav­ing the com­pany be­fore the mar­ket dis­rupts, ex­poses their lack of tal­ent, and destroys their rep­u­ta­tion. We can­not re­ally blame them as

Align­ment is over­rated in com­pa­nies. Pro­fes­sional man­agers value loy­alty. They be­lieve that they know what to do, why to do, and how to do.

they played the part ex­pected by the se­nior man­age­ment. It is just that in times of dis­rup­tion, this as­set-like qual­ity be­comes a fatal li­a­bil­ity.

as­sump­tion 03: ex­per­tise is ev­ery­thing

Or­ga­ni­za­tions like to sur­prise cus­tomers with new prod­ucts and ser­vices. Af­ter all, they know what cus­tomers want and what they care for more than cus­tomers is them­selves. Man­agers love quot­ing Steve Jobs. Is he not the per­son who fa­mously said that if cus­tomers were asked to im­prove the mu­sic lis­ten­ing ex­pe­ri­ence back in a day when CD play­ers ruled, they likely could not have en­vi­sioned the iPod? Steve Jobs never said bar your ears from lis­ten­ing to cus­tomers. He said lis­ten to what the cus­tomer needs and not what the cus­tomer wants. Or­ga­ni­za­tions and em­ploy­ees have stopped lis­ten­ing to cus­tomers. If tele­com com­pa­nies re­ally lis­tened to cus­tomers, they would have re­al­ized it is not price cuts that cus­tomers are clam­or­ing for. They badly want a re­li­able ser­vice. No com­pany can get the cus­tomers to stay in­vested with­out truly lis­ten­ing to them.

as­sump­tion 04: want to be­come in­dis­pens­able to cus­tomers, want to make em­ploy­ees dis­pens­able Or­ga­ni­za­tions are touchy about los­ing cus­tomers. Man­agers wail at any mar­ginal drop in mar­ket share and prof­itabil­ity. How can cus­tomers be­tray us? Or­ga­ni­za­tions want un­con­di­tional loy­alty and are will­ing to do any­thing to make cus­tomers ad­dicted to their com­pany. Em­ploy­ees can make this loy­alty a re­al­ity by creat­ing a per­sonal con­nect with cus­tomers whom they serve. Any such per­sonal con­nect raises red flags. Com­pa­nies worry about em­ploy­ees be­com­ing in­dis­pens­able. What if the cus­tomer loves the em­ployee more than the com­pany? Most job ro­ta­tion pro­grams, suc­ces­sion plans, and train­ing are an

If telcos lis­tened to cus­tomers, they would have re­al­ized it is not price cuts that cus­tomers are clam­or­ing for. They badly want a re­li­able ser­vice.

off­shoot of this worry and not a gen­uine de­sire to make em­ploy­ees in­dis­pens­able. Why would em­ploy­ees who know this in­ten­tion in­vest their phys­i­cal, emo­tional, and in­tel­lec­tual en­er­gies, es­pe­cially when the com­pany needs them the most?

as­sump­tion 05: cul­ture is a priv­i­lege

Com­pa­nies proudly sell the idea of ‘great place to work’ to em­ploy­ees. Their HR de­part­ments talk about the com­pany’s cul­ture of fair­ness, re­spect, and ca­ma­raderie as part of the to­tal value propo­si­tion they of­fer to prospec­tive em­ploy­ees. A CEO with whom I worked in the past tried hard to get the best place to work award. ‘We could show the award as a car­rot to hire peo­ple for lower salaries’, he would say.

In a democ­racy where fair­ness, re­spect, and equal­ity are guar­an­teed by our con­sti­tu­tion, can an or­ga­ni­za­tion pro­vide great work cul­ture as a priv­i­lege? It is the right of ev­ery em­ployee to work in a great cul­ture and if a com­pany does not know how to build such a cul­ture or does not want to, it sim­ply does not have the right to ex­ist.

Once you de­cide to bust the as­sump­tions that stunt stake­hold­ers’ in­vest­ment in your fu­ture and wear new lenses, you are ready to in­tro­duce new ways of work­ing. Here are a few: co-cre­ate a shared vi­sion with all the stake­hold­ers

If we are con­vinced that we can win only to­gether, we need to co-cre­ate with our share­hold­ers the vi­sion, val­ues, and strat­egy. There are a va­ri­ety of meth­ods avail­able that use sys­tems’ think­ing tech­nol­ogy to en­able such a di­a­log. Conventional strate­gic think­ing, which ap­pears more like a con­spir­acy theory for other stake­hold­ers, does not build enough trust. For ex­am­ple, hav­ing a shared vi­sion with stake­hold­ers en­abled NASA to land man on the moon. When a ven­dor re­al­ized a big mis­take they made in de­sign­ing a part, in­stead of keep­ing quiet, they in­formed NASA, re­designed the part, and worked to­wards the shared dead­line of 1969.

break the walls

The bound­aries be­tween de­part­ments, board mem­bers, cus­tomers, em­ploy­ees, and sup­pli­ers re­sult in stag­nant com­mu­ni­ca­tion. Each stake­holder op­er­ates on out­dated ex­pec­ta­tions and in­for­ma­tion about each other. Break­ing the walls means al­low­ing com­mu­ni­ca­tion to flow seam­lessly. A hos­pi­tal chain prac­tises an ex­am­ple of this. Each board meet­ing of this hos­pi­tal chain takes place at one of their treat­ment cen­ters rather than at the iso­lated head­quar­ters. The meet­ing begins with a pa­tient talk­ing about his or her re­cent ex­pe­ri­ence at the cen­ter.

em­brace non-cus­tomers, non-sup­pli­ers, non-em­ploy­ees, and non-com­peti­tors

Your fu­ture stake­hold­ers may be hid­ing some­where. They may not fit in your def­i­ni­tion of stake­hold­ers now. Most of them may not be­lieve that your prod­ucts are for them. For ex­am­ple, if you are a toy com­pany, your pri­mary cus­tomers are chil­dren. How­ever, as more and more peo­ple live longer, re­tired peo­ple may be­come a large cus­tomer base. Apart from get­ting the badly needed re­cre­ation from toys, they will serve to keep them phys­i­cally fit. How about a sales head for non-cus­tomers or a pur­chase head for non-ven­dors? En­gag­ing with such non-stake­hold­ers will give ideas for the com­pany and build early stake­holder con­nect.

The pros­per­ity of ev­ery stake­holder is im­por­tant for the in­dus­try. Only when stake­hold­ers clearly see them­selves as part of a suc­cess­ful fu­ture will they want to stay in­vested. Boards would do well to re­ward their com­pany’s lead­ers for keep­ing the in­dus­try healthy. This means en­sur­ing that all the stake­hold­ers win in the present as well in the fu­ture. ■

Only when stake­hold­ers clearly see them­selves as part of a suc­cess­ful fu­ture will they want to stay in­vested.

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