Analysis: Balance Of Interests

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[<p><p align="justify"><span class='dropthecap'>M</span>ahir is a nice person. one cannot help liking him and hoping that he will always find the right balance between long-term business goals and his own needs and values.<br /><br />Red Dot's situation is similar to what all organisations face — balance of interests of all stakeholders. What makes Red Dot somewhat unique is that Mahir, as a single stakeholder, has two strong drivers — one, as a businessman and, two, his sense of values and a need for personal contribution to his employees. So, while similar, there are two ways in which Red Dot is different from a typical ‘corporate'. <br /><br />The foremost difference is that Red Dot is not merely about ‘maximising shareholder returns'. It is a business model that also satisfies Mahir's personal need to contribute to a larger group of stakeholders; to people around him. The second is that it is still a small organisation (perhaps it remains small to ensure that Mahir continues to have this sense of personal contri- bution) and, therefore, it is still possible to ensure a strong ‘commonality of ethos and ethics'. <br /><br />This is never an easy challenge. Red Dot needs to grow to ensure that people working for it also have a long-term future and more and more people can benefit from its values orientation. But it will also struggle to grow while retaining its current values-led position.<br /><br />Mahir knows that his current model is not scalable and, yet, he is reluctant to convert Red Dot into a typical profit-maximising organisation. There is nothing wrong with this reluctance. Given that he is the sole owner as well as the manager of Red Dot, it is perfectly possible (though not always easy) for him to effectively balance his business needs with his values. He will need to make some compromises — letting people go when they have a need to grow bigger. But in his own way, Mahir has accepted this and other trade-offs.<br /><br />Both Uddhav and Mahir realise that Red Dot stands for much more and their work styles and the actions reflect this. It comes alive in what Uddhav says to Ravi: "Worse, you have stopped giving, not just to Red Dot, but to friends here."<br /><br />My only suggestion for Mahir is that he would benefit from a clearer and sharper understanding and acceptance of his drivers and values, the trade-offs and the balance he needs to maintain. Once he does this, he will spend less time agonising about it when situations of trade-offs arise. In Ravi's case, Mahir will realise sooner that he (Mahir) not only needs to make sure that Ravi's lack of performance does not hinder his business goals, but that his bigger need is to truly help Ravi grow as a professional and as an individual. He will not need to spend "days and months agonising over Ravi's dilemma"; the same outcome could have happened much earlier.  <br /><br />Mahir will need to accept that if Red Dot's growth is acceptable only when the same commitment to each and every employee is maintained and the same values are as deeply embedded in the organisation, it will probably be a slower pace of growth and, perhaps, more limited as well. If he is willing to accept some compromises, he may be able to grow a bit faster and a bit more. I would say to Mahir exactly what Uddhav said to Ravi — "All this you need to figure out, for only you can." The balance is for him to maintain.<br /><br />Management is, of course, easier when there is one over-arching goal. Choices become easier. In most organisations, the over-arching goal is sustainable shareholder returns and this is the touchstone used in situations of trade-offs. In Red Dot's case, there will be more struggles to come to the most appropriate response but it will probably be far more satisfying for Mahir and everyone else.<br /><br />There have always been similar trends in the corporate world. With Indian PSUs, the over-arching goal was to provide employment. ‘Profit' was a bad word as it was seen as a hindrance to the main goal. Unfortunately, in their inability to balance employment generation and profit, many PSUs ended up compromising the needs of the very people they sought to protect, by becoming sick or being sold. <br /><br />The challenge that all organisations face is to find the right balance between sustainable profits/growth and responding to as many stakeholder needs as comprehensively as possible. Even today, the debates around going green, off-shoring and affirmative action, are around maintaining the same balance of interests.<br /> <br />Good management is all about being able to balance these often conflicting demands to the satisfaction of all stakeholders. And the better it is done, the better are the societies that we live in. And that is why I like Mahir.</p> <script type="text/javascript"> var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } </script> (This story was published in Businessworld Issue Dated 16-11-2009)