GDP Target Vs GDP Expectations

I read somewhere today that Finance Minister setting targets of 9% GDP growth rate is more of a expectation that a target. Assumption being it’s driven by external factors like monsoons and long term policy decisions. Also read interesting correlations to business world and how people get rewarded or penalized for something that would have happened anyways due to decisions taken long back.

 

Interesting thoughts and interesting correlations. While the correlations are correct the allegation I am not sure is. I am not too sure that FM has no control over the GDP rate. The gestation period of impact of several policy decisions in today’s economic conditions are much faster and infact reflect within a year. Ofcourse there are factors like monsoons and its resultant impact that they can hardly do anything about. But then they would have factored the forecasts of that.

 

In a service industry driven economy the impact is infact felt within 2 quarters. If inflation and coalition politics was to give FM a free hand, and ofcourse if there was intent (which we all hope there is), the GDP impact can be felt in 2 quarters I feel. Case in point if he was to ease up control on money, lending would ease up, loans would ease up, housing sector would witness growth (players like ICICI, HDFC would take maximum one week to put pedal on sales), hence related industries would start to get boost. It’s a whole cycle.

 

The gestation periods in business are coming down a lot. Same is true for economies. Long term policy decision in my view decides the trajectory of growth. You can’t change from a 4-5% GDP rate to suddenly a 8-9% rate…that’s what will take long term decisions. However once that’s done, within the decided trajectory there is a lot of role for the finance minister and government to play. Good governance and sound financial policies can make a difference of almost 1-1.5%. Which in economies like Indian can be huge J

 

~~Rohit~~

 

 

 

Compensation Strategy and Business Models

Almost every compensation consultant you come across talks off how it’s linked to business strategy. As much as there is merit in the statement, far too many compensation consultants are not very clear about how to establish this linkage. Not too many of them have clear answers of how will compensation strategy with a Business Strategy A be different from the one with a Business Strategy B.

 

Anyways while that is a whole topic of discussion in itself over the years I have found interesting learning’s with respect to compensation increases. Irrespective of how overall industry is moving you can move at a much faster rate by constant relook at the business model. In my experience whoever has understood the concept of how to manage aggressive rate of compensation increases, automatically picks up a lot of business perspectives as well and infact becomes a better business manager.

 

The basic premise is very simple and very powerful. High compensation increases boil down to increasing Revenue Per Employee (RPE). End of the day business must make more money to distribute more money…a stable state business or a stable RPE will only be able to afford industry driven compensation increases. For anything more you have to constantly increase the worth of every employee.

 

Some of the strategies that help in managing aggressive compensation rates are:

·     Increase RPE

·     Constantly increase product/service price and its value add

·     Push less experienced (and hence cheaper) resources to manage bigger tasks

·     Create process efficiencies at every milestone to manage same volume of business with lesser people

·     Look for standardization, technology and other tools for freeing up resource bandwidth for more business

 

Till the day a business can keep creating more per person funds in the business there is no time limit to when you can manage aggressive compensation increases. I have witnessed in industries where average increments are to the tune of 8-10%, organizations who understand this connect better manage 30-50% for long durations.

 

Ofcourse at some point they will come to s stage of consolidation….but what the hell this is just one way of doing this. If this can survive you for a cycle of 3-4 years, by that time you would have created significant upside for the business and individuals. Post that there are other interesting strategies to deploy.

 

As much as this may sound easy to do in first read, mind you carrying this out is not so easy. Good part is most of the difficulties are in the mindset and our usual business sense. Usual mindset infact works almost opposite where one looks at decisions like higher number of people (to have more power, represented in this case by number of reportees), more senior people (which makes it easier to manage business).

 

This strategy is a complete opposite of the traditional way of managing business J

 

~~Rohit~~

 

 

Kissa Kursi Ka…

There are some interesting correlations I have found in the performance of an individual and performance of the portfolio a person is managing. Very often irrespective of whether or not the person is capable or performing, he or she gets evaluated on the basis of portfolio they are managing. This is truer the higher you go in the organization.

 

How often do you find in times of growth as the business delivers better results, the person managing that portfolio also grows rapidly….ever heard of the phrase its important to be the right person at the “right time”…the admission of the right time is in a way admission of this phenomenon. Interestingly the job at senior levels is a lot about aggregation and administration….ofcourse its supposed to do much more as a leader in terms of long term planning etc…however crudely put many people can get away by just aggregation. In such times often portfolios might perform great due to market conditions, due to a good team, due to organization brand, and such other many factors. This is where corporate governance comes in conflict of shareholders interest….shareholders and stakeholders in any organization would most often stand by the individual and you see the correlation only strengthening. In growth markets it could create positive perceptions about an individual over a period of time….similarly in declining markets it could create negative perceptions about the individual.

 

Crude as it may sound, most of the organizations fail to differentiate between individual performance and business performance….while individual performance needs to be linked strongly to business performance it’s an interesting dichotomy where one needs to also know the art of separating them. Else individual performance will continue to be dependant upon how the portfolio they are managing; “meaning position they occupy”; is performing…it’s the position that you occupy that’s growing and in turn growing you by default.

 

I would love to see organizations where the correlation is broken without intent of delinking individual’s contribution to business performance. I would love to see individuals occupying top jobs and conversations doing rounds “he has grown on his capability…and not because he was the right person at the right time”.

 

Till such time I would say performance management is a lot of good talk and nothing else….in the end its kissa kursi ka J

 

~~Rohit~~

 

Arranged Marriage – 21st Century Concept

I often come across curious foreigners who wonder whether India still follows the concept of arranged marriage. It’s hard for them and many Indians to understand why a concept that’s been looked upon as outdated for centuries is infact tailor made for the 21^st century. Ofcourse it needs to be looked at from a different perspective J

 

The pace of this century is such that everybody is getting sucked in their own corners….there are lesser number of social communities…there is less time for family, friends…..infact there is less time for even self. Suddenly you find there is more and more unmarried population stuck in their late twenties and early thirties. The problem that each of them faces is quite similar, they are all interested in getting married, but just don’t have anyone to get married to in their circle. Daily chores of life and work ends up occupying all the time and there is no time to make new friends, new circle. Ofcourse most of them are not comfortable with the idea of arranged marriage.

 

I look at this concept as a blind date set up by your parents…moment you look at it as nothing but a blind date, its actually kinda cool concept. In life you often go on blind dates during your teen years and for some lucky ones even later, its going back to the same fun…Now some sort of filtering would be required in any situation for such a blind date, so here your parents, family, friends, whoever has done that from a slightly longer term perspective than just a evening out. Couples meet; have a drink or coffee together, and like in all blind dates, if everything goes right they meet again.

 

Fact you met someone after some sort of filtering of social habits/criteria, fact that you met someone repeatedly because you enjoyed those dates, fact as a concept it takes you back in life in terms of age and hence more open person (allegation being age makes you more rigid J)…there is every chance of a high success rate.

 

In this era when one is struggling to meet new friends, make new friends, I wonder why we Indians fail to see this is such a powerful thing for the world….in the process you will have some nice evenings, make some nice friends….and who knows you may as well meet your life partner.

 

~~Rohit~~

 

Abnormal Normalization….

If there is one thing that explains the state of HR function best, it’s the principle of Normalization. It took me years to understand so how does the performance outcome of an individual change even though his results show otherwise. What is relative performance and how is it different from absolute performance.

 

Over time I figured concepts like normal curve, relative performance etc (I must confess all my understanding of terms like curve, PMS etc changed once I joined HR J….but that is another story). In the name of maintaining a performance curve organizations would “manage” the number of performers in each category of performance….why couldn’t more than planned numbers perform better or worse…it’s a self defeating system where I want to promote high performance, but guess what, they can’t exceed a specific number.

 

Whilst I do understand and appreciate the need to manage budgets and avoiding a cost overrun situation and also that there are better ways of applying this concept these days, I think it’s the single biggest admission of the fact that not all is well with HR systems in most organizations.

 

It’s like saying I have the best performance management system in my organization, but I would still like to protect my ass by having normalization as a back up J

 

~~Rohit~~