Analysis: Purpose To Rewards

<?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'>R</span>etail, the business of Kosha international, is a very nascent sector in India. Kosha will face rapid but inconsistent growth, new and different competition, and the reality of diverse and changing Indian customers.<br /><br />Whether it is CFO Darius, CEO Shorey or the store manager Mubina, all key people at Kosha would, typically, be joining from outside the retail sector — from more settled and stable organisational environments. Retail's charm is the ‘zing' of high growth and the challenge of shaping a new sector. While assessing the current incentive decision dilemma at Kosha, I would, at the back of my mind, keep this key aspect of why people join Kosha in the first place.<br /><br />All modern, scaled up organisations have to build an ethos of being performance driven, predictable, fair and merit-based. Only then will a large number of Mubina, Kartik and Jennifer-like managers join them.<br /><br />It is easy for Darius, with the benefit of hindsight, to find obvious flaws in the current incentive structure. The shortcomings are apparent — you should reward the teams for the difference (for example, growth, margin improvement) they make and not punish or reward them on factors beyond their control (say, location, catchment profile, historical sales). You link the incentives of support functions also to those of the sales functions so that the two teams pull in the same direction. Though the current design is flawed, CEO Shorey's intention to incentivise teams based on performance is definitely not. The current reward plan must be revisited and corrected, in this light.<br /><br />Every employee joining Kosha is making a choice: a choice to be in a high-growth, challenging industry that is closer to the customer than most. There is a sense of purpose and a feeling of being a leader. Kosha's leadership should capitalise on this reality while approaching team building and reward design. The current design is seen by teams as unfair, and it will not encourage the desired behaviour. It needs to change. However, if people were really seeking the most measurable, stable and fair incentive system, they would work in old, mature industries that have predictable 9 per cent per annum growth with stable forecasting and target setting mechanisms.<br /><br />Leaders like Shorey, Ami and Balu should first build in their teams a sense of purpose that is beyond any targets, that is almost evangelical in nature. This is part of the success recipe to win businesses in sunrise sectors. High growth year on year, busting targets set, inter-store rivalry for breakthroughs should be the lifeblood of Kosha's journey. It must make temporary ‘heroes' out of store managers like Mubina, even if this is not entirely ‘fair' or ‘measurable'. Managers at the store level must see themselves as entrepreneurs and leaders of teams with possibilities of dramatic internal opportunities thrown up by rapid business expansion.<br /><br />Every individual employee needs a mix of three aspects of reward — financial, intellectual and emotional progress. Intellectual reward comes from a sense of learning and developing oneself. Emotional rewards have to do with pride, recognition and reputation building. More motivated people link their personal journey to an organisation's where all these three  aspects are given importance. Kosha, like most retailers in India, has an inherent advantage on the intellectual and emotional growth of people. They must capitalise on it.<br /><br />I also notice nice cross-functional flow of communication in the leadership. It behaves almost like an informal management council. This is a strength and will allow faster course corrections. In this progress, Shorey must build a stronger second line for himself. The impending high growth will require that, soon.<br /><br />Variable pay and incentives are tangible manifestations of ‘shared progress' in organisations, which are otherwise a collection of heterogeneous people. Having started the journey, Kosha must stay on the path of team incentives. The design flaws are apparent and the leadership can quickly correct them and put Plan B in place. Goals must have components of  growth, margins, customer, process and learning, to make them balanced. Simultaneously, the leadership must create a cultural glue that binds people to the organisation's vision and prepares them for more, not less, change. This is a must. Retail is built store by store, each distinct catchment at a time. Till the marketplace and retail organisations mature, it is smarter to have store managers as empowered kartas (holistic leaders) bound by a common business and service philosophy. Measurable and standardised ways to motivate and reward people will evolve as the sector matures. As for Mubina, her business head must quickly have a sandwich lunch and a store walk with her, and personally wean her back. There should be no fear of making exceptions for good people.<br /><br /><em>Damodar Mall is director, food strategy, at Future Group. A seasoned food retailer, Mall is known for his shopper insight and has been involved in shaping of retail concepts such as DMart, Food Bazaar and KB's Fair Price<br /></em></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 11-10-2010)