Alawyer’s nightmare is not being able to give a clear answer when a client comes calling with a query. Answers like those of Harry Truman’s economists (“All my economists say, ‘on the one hand... and on the other hand…’”) won’t do. After all, if a lawyer cannot interpret the law, who can? But lawyers can and do face such a situation; nowadays, to queries from firms on how they should go about complying with competition laws, they have no answer.
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Hewlitt-Packard launched two of its latest touch screen computing notebooks and an ultrathin all-in-one desktop, compatible with Windows 8 on 19 December' 2012. The notebooks offer a wide range of features including the HP Connected Photo powered by Snapfish and HP Connected Music powered by Meridian for convenient access to photos and music. The HP ENVY x2 is a hybrid PC that has a detachable screen that becomes a full tablet when separated from its keyboard. With up to seven hours HD video playback on the tablet and 12.25 hours on notebook, it possess a 11.6-inch HD touch display, Beats Audio, an HD webcam plus an 8-megapixel camera, and near field communication (NFC). The HP ENVY TouchSmart Ultrabook 4 possess a 14-inch multitouch HDdisplay, with up to five hours of battery life with Beats Audio and optional AMD graphics with 2GB of graphics memory. It measures 23 mm thin and weighs 2.16 kg. They are expected to hit the stores in India from January 2013, priced at Rs 59,990. The HP ENVY 23 TouchSmart AiO PC comes with a 23-inch diagonal HD display and delivers a 10-point multitouch technology, supported by Intel Core i5 processor. It will hit the stores in India on December 20, priced at Rs 71,990. "Consumers now can choose from a broad range of HP PCs featuring multi-touch displays, versatile form factors, sleek designs or customizable solutions that address their needs," says Rajiv Srivastava, VP and GM - Printing and Personal Systems Group, HP India. HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems.
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In a human capital intensive industry like IT, wrong hiring decisions result in loss of productivity, attrition and associated ripple effects, says Sakaar Anand, Vice President, HR, CA Technologies, India. A former IT expert and people manager, Anand brings a top-level view of the functioning of every business within the organisation and the ability to add a business angle to HR. Anand believes a couple of things that the HR fraternity can look to change in the near future are providing pay for performance without a step-up in designation and (hold your breath) unlimited vacation for top-notch employees!In our series on HR practitioners, Anand is the fifth HR head to share with Businessworld.in what makes HR leaders tick. Excerpts from the conversationWhat made you choose HR as a profession?In my earlier roles, apart from dealing with infotech, I was a people manager and enjoyed a connect with the employees. It was a goldmine of an experience for me in terms of understanding others as well as myself, exercising self-control while listening objectively and guiding as a mentor, and not as a boss to motivate employees to give their best. At one point, the HR function used to report in to me. With these experiences on-hand, when the opportunity presented itself to don the HR hat, I readily accepted it. As HR head, I get a top-level view of the functioning of every business within the organisation and the ability to add the business angle to HR from my past experiences.What has been the biggest achievement of your career?The biggest achievement has been the ability to create an environment, that has enabled employees to come forward and provide honest feedback to the leadership team from time to time, that reflects the HR team’s credibility as a visible and value-added business partner. This accomplishment is a true reflection of the pride that employees have working for CA Technologies. It goes without saying that this is an ongoing process that will continue to be refined going forward. What have been the primary traits/qualities that have helped you attain your present position?My business know-how combined with technical expertise, and the ability to combine multiple functions to create a single cohesive team, are the traits that helped me attain my present position. What are the steps a company should take to develop and motivate future leaders?HR alone cannot groom leaders for tomorrow, but it has to partner with business to help identify talent and provide enrichment opportunities essential for grooming tomorrow’s leaders. While grooming is the key for future leaders, on-the-job training usually takes place. HR can put in place certain steps that not only help identify and groom but also help to retain future leadership talent. How do you retain talent in your company?Talent retention at CA Technologies is not just a reactive measure, but a proactive step to keep the current talent happy, in a manner, that employees consciously choose a long term career path with the organization. Right from freshers, to experienced professionals, CA Technologies believes in grooming talent, which automatically helps us retain talent. CA Technologies, creates forums that lets employees design their career paths within a framework called ECG - Eco system, Competency and GrowthFostering an atmosphere of innovation via various programmes – Discover@Work, TEDx, Coding Superstar, Club Avant Garde etc.For employees choosing management stream – New Manager Assimilation Programme, Management and Leadership Academy, Managerial Grand Prix, Leadership Development ProgrammeFor employees choosing technical stream – Individual Contributor Development programme to foster cross product and cross functional collaboration, build expertise, leadership and excellence.Work place flexibility and rewards – CA Technologies offers various avenues in terms of work place flexibility such as internal mobility both at local and global level, higher education and certification reimbursement, alternate work arrangement in terms of work from home option, tele-commuting and shared/remote workspaces established specifically for teleworkers.There is patent bonus and awards for employees going the extra mile to find new ways of doing things and going beynd their role as well. There is also a “author programme” that rewards employees after they publish articles, conference papers or books related to company business, outside the scope of their job responsibilities.What sets your company apart from other companies as far as work culture goes?As far as work culture is concerned, human is capital for us and not resources. We allow flexibility and also ensure that the candidate is “culturally fit” via brand interviews. We also have boot camps for campus hires with a variety of programmes and workshops to teach them soft skills plus technical sessions, assessments etc.How do you track employees' satisfaction or dissatisfaction in your company?When it comes to tracking dissatisfaction, we have multiple avenues to ensure that a single employee’s dissatisfaction does not create a ripple effect. The channels that are available at CA Technologies for employees to express their point of view are: Stay and exit interviews: One-to-one conversations with managers and/or HR Business Partners to understand employee aspirations. Going forward, we sometimes, modify policies of the company if needed. These interviews are called “moments of truth”.Change leadership core values assessment: A survey that provides employees a chance to provide feedback to the organisation about specific areas such as performance management, customer success etc. as well as rate leaders, in terms of assessing them, on their ability to live and lead by example, and determine whether the leaders serve as role models for employees to emulate.Regular round table discussions, skip-level meetings, town halls and email addressesEmployee champions: A group of employees act as liaison between, HR and employees to receive feedback about the existing and yet to be implemented policies and make corrections if warranted.WE CAre: An employee suggestion Chatter group where employees can suggest, ask and provide feedback about any aspect of the organisation. Concerned departments act on the suggestions/feedback to address employee concerns.Employee assistance programme (EAP): A completely confidential and free employee assistance programme through an external professional agency to employees and their immediate family members offering expert advice How important is HR to the bottom line of a company?The bottom line of any company is an amalgamation of multiple functions within the organisation, including HR. The duty of HR function is to prepare managers to hire the right talent. Especially, in a human capital intensive industry like IT, wrong hiring decisions invariably result in loss of productivity, attrition and associated ripple effects. The role a manager plays in identifying, recruiting and retaining the right talent significantly contributes to the bottom line.How should HR be integrated with the core line of business?The relationship between HR and Business functions is bi-directional. The function of HR is to provide intelligence and help create an organisation that can ably execute strategie. It is the duty of business to make HR an integral part of their strategic decision making process.If you could change three things about HR practices, what would they be?As a professional with 17 years of experience both on the business side and HR, here are a couple of things that the HR fraternity can look to change in the near future at an industry level:Compensation ceiling: Providing pay for performance without a step-up in designation. If an employee enjoys what he/she is doing, organisations should respect it, while ensuring that the employee is financially satisfied with the compensation. Linking compensation with designation demotivates the employee and in the process an organisation loses a subject matter expert.Unlimited vacation policy: As long as an employee delivers with top-notch quality, the employee should be entitled to unlimited vacation.(As told to Poonam Kumar)
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For China watchers, these are interesting times. A change in the leadership of the Communist Party has prompted most to start looking for signs that will usher in political and economic shift in the world’s second-biggest economy. And Xi Jingping, the new party secretary who will take over as the country’s president in March, has not disappointed them. Not only is China flexing its political muscle in its dispute with Japan over a bunch of islands, Xi is signaling a shift towards more economic reforms as he ostensibly takes on powerful state firms and Chinese companies aggressively seek cheap takeover deals in the Western world where distraught businesses are up for sale. For a nation with $3 trillion in its kitty at a time when most of the Western world is struggling to make ends meet, China’s confident swagger is understood, but obviously not appreciated. So, what’s Xi been up to in his first month as party secretary? A lot. After becoming party secretary, the new leader’s first out-of-town foray to Guangdong, the fountain of China’s industrial and economic reforms launched by paramount leader Deng Xiaoping, was a signal that he was pushing for more. Xi has also come out strongly against corruption – an ailment that has become deep-rooted in China’s government and society – and under his month-long watch more officials are under scrutiny for dishonesty. Whistle blowers are in and Internet portals are happily lifting the lids off the private lives of government officers. Financial impropriety is banned and sexual peccadillos unacceptable. But an internal, difficult and welcome shakeup of the system also has a flip side. While Xi is pushing reforms at home, there is little sign of China changing its vision of expanding its economic and political influence overseas; this despite Xi’s recent statement that no country can go alone in today’s world. If there are signals that China is working hard to change internally and make party officials more responsible, there are also strong indications that Xi would want to play the nationalism card and get China to assert itself on the global stage as he consolidates power. In recent weeks, China has unveiled its retrofitted aircraft carrier, issued new passports that show disputed territories as its own and sent a surveillance plane over islands that both Beijing and Japan claim. This foreign policy assertiveness follows China’s decision to send warships to South China Sea a few months ago to contest territorial rights with smaller countries such as Vietnam and the Philippines. Beijing’s muscle pushing in South Asia has also not gone unnoticed. On the economic front, the wallets are out. Chinese state companies are using their pile of cash to aggressively sink their teeth in Western assets that Beijing needs to secure its future in energy and other industries. China’s military bullying is scaring its neighbours; its economic expansion the rest of the world. A confident Xi – who disappeared from public for several days just before the Communist Party’s conference in November – seems to be on a roll, as the domestic economy begins to turn the corner and confidence returns in the government to take solid steps to push hard financial reforms. The buying spree has caught some speed and is likely to accelerate in 2013 as Xi and the new Politburo settle down to manage the world’s most populous nation that needs to restructure its economy to sustain high economic growth in a fast changing world.In recent days, Chinese investors have struck a deal to take a controlling stake worth $4.2 billion in American International Group’s aircraft leasing business. More importantly, China National Offshore Oil Corporation (CNOOC) received Canada’s green signal to acquire an energy company called Nexen for $15 billion. Nexen also has oil and gas fields in the United States and the U.K., both of which will now be available to CNOOC.These are big-ticket deals that are possible because China’s state-owned companies have the backing from government banks, which offer subsidised loans. Recent reports also suggest that the Chinese companies have become smarter at managing and mitigating opposition in Western countries where they are seen as national security threats. The perception game is being played better by Chinese firms than before. For example, they are beginning to target non-iconic brands and spreading into sectors other than natural resources and financial services. They are also happier taking minority shareholding.These subtle changes in takeover strategy will help Chinese firms not only to redefine and learn new market tactics, but probably also become more acceptable to the West that fears domination by a country that will become the world’s biggest economy in the foreseeable future.In the meantime, as Xi settles in and puts his team together, expect a larger dose of nationalism sprouting from China as the West fights its battles and Beijing rushes in to use the economic uncertainty to continue flexing its political muscles.(The columnist is president, public affairs, Genesis Burson-Marsteller and a former newspaper editor. He has a deep interest in matters related to China and Southeast Asia)
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Everybody knows that business is all about managing uncertainty. What about your ability to cope with change? Are you adaptable? Are your key employee(s) adaptable? Can they ride the uncertainty? Most of the times we seem to ignore such important questions. While we all agree that the world has become much more dynamic over the years; we seldom test our own potential to ride the change. This is very troubling because the best business strategies will fall apart if the people are not ready to meet the challenges. While we generally attribute such gap to implementation issues, we seldom focus on the people who are supposed to carry out the business strategies. This leads to a clear mismatch between business strategy and the human resources management. What do we know? Adaptive people are expected to solve unfamiliar problems creatively, deal with uncertain and unpredictable work situations, are good at learning work tasks and technologies, demonstrate flexibility in interpersonal adjustment, are at ease working in different cultures, and can deal with various physical conditions effectively. Based on research, we know that our performance varies over time, sometimes on a daily basis. There are days when we feel like being a “superstar”, able to accomplish the most difficult task while other days unable to complete the simplest of chores – a feeling of “being dud”. This variation in performance can be seen not only in business settings but also in other occupations e.g. acting, painting, sports etc. It is very difficult to maintain sustained high performance. As most of us follow cricket, let’s elaborate on this idea. For example, cricket fans would love to see a consistent winning performance from their favorite players, the reality is far from it. The performance variation causes frustration for even the most ardent believers. This consistent person may not deliver an exceptionally flashy performance but will be an extremely reliable player in the team. Do you have similar sets of people in your winning team? If yes, we need to pay attention to what this means for your business. Empirical evidence suggests that on an average there is more variability within a person than between people. It means that on a given day, a less proficient employee may outperform your “star” employee. The implications are immense. Are they true reflection of the relative performance? At the heart of the tendency to adapt is the fact that some individual differences help or hinder one’s ability to respond to environmental changes. There are certain types of individuals who are adept at taking benefit of opportunities while there are others who may squander such chances. The way forward: what should be done? This question can be answered from the perspective of an employer as well as an employee. First, let’s take the perspective of an employer.What do you want in your employee? A consistent or highly variable “star” employee? This is a question each one of us should ponder upon. Based on that, we should align our selection, compensation and promotional process. If you want a consistent employee, you should hire highly motivated people who can persevere and overcome obstacles to take advantage of opportunities. A less capable person under trying times may become overwhelmed or even disinterested. Make sure your reward systems are aligned to reward consistent performance. Examine the task: Does it require you to repeat the same task or be creative each time? When tasks are somewhat repetitive and require people to adjust a little to new settings; conscientious people do well because they are better at conforming to directions and processes. However, when tasks require people to drastically change (e.g. learn new tasks) their behaviours to go beyond stated objectives, you need people to explore new possibilities and accomplish work. People who are high on openness to experience are expected to do better during creative tasks. Have you matched your employees’ natural tendencies to the task at hand to take advantage of the natural synergies? Describe the environment: Are there enough opportunities or obstacles? If the task is highly dependent on the external environment (e.g. culture, physical demands), employee characteristics are more likely to impact their own job performance. Conversely, a stable job is less likely to lead to highly variable performance. Assess your performance appraisal: Think of the day or time of the year when “annual” performance evaluations are carried out. If you or your organization carries out just once annual evaluation, this may be masking the true performance. Further, we know that evaluators fall prey to biases like primacy (or first look) effects, and recency effects (the most recent scenarios are vivid). A way to avoid biases is to conduct appraisals more often. If you are reporting quarterly business results, the performance appraisal should also capture employee’s evaluation across multiple quarters. What does it mean as an employee? Assess your fit with job: Does your job validate your consistent performance? Or does it reward only extreme “superlative” performance? E.g. If you are a consistent performer, the organization should reward you for such. Conversely, if your performance varies wildly, make sure you are rewarded for superlative performance and not unduly punished for a less than acceptable performance. If your current performance style does not match with the HR policies; you may like to seek out a transfer within a company or other jobs that is better aligned with your performance.Assess your personality: If you are conscientious person, are you in a job that is more focused on repetition of task? If the job calls for lot of creativity, you may have a hard time fitting in.Assess environment: Some jobs within every organizations are relatively less immune to changing rules, competitive actions than others. Do you enjoy challenges? Or, would you prefer a more stable context.Performance appraisal frequency: If there is only one annual appraisal, you want to make sure your efforts during the year are fully considered by your boss. If you have notched up recent achievements, do bring it to the notice of your employers. (The author is assistant professor - organizational behaviour, Indian School of Business)
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The Japanese consumer electronics company Panasonic Corp may be struggling with heavy losses internationally, but it continues to bet big on India. On 12 December, the company expanded its presence in India by inaugurating its sixth facility in Jhajjar, Haryana — one of its largest unit so far in the country. The 76 acres of land will be a production hub for split air conditioners, full automatic washing machines and industrial tools like welding and cutting machines.While the facility has a capacity of producing one million air conditioners and four lakh sets of washing machines, from January 2013 to March 2014 it will produce 800,000 air-conditioners and 320,000 washing machines.“There was a gap between supply and demand, and we were not able to supply to India market as we wanted to,” says Manish Sharma, India Managing Director of Consumer Product Division.For Panasonic, India is one of the high growth markets in Asia Pacific with contribution of about Rs 5,500 crore of revenue last fiscal. It is estimating a turnover of Rs 10,000 crore in fiscal 2012. For the first five to six months, the company will produce for the Indian market. However, it will gradually start supplying to West Asia and Africa. By 2013, five per cent and by 2015, 20 per cent — of the products manufactured in the facility — will be used for exports.The plant will see invest about $200 million (Rs 1,100 crore) coming in up to 2015 and provide direct employment to 2,000 people. Panasonic, which holds 13 per cent of the air conditioner market, has seen a healthy growth in its air-conditioner business riding on back of its Cube ACs, a product specially designed for developing countries like India. These ACs, which were being imported from Malaysia and Thailand, will now be produced in Jhajjar. Sharma expects its market share in air conditioners to grow to 20 per cent by end of 2013.The company will, however, continue to import some products like the inverter ACs and 17 per cent of the non-inverter ACs for the Indian market. Panasonic is yet to catch up in the washing machines category. It currently controls three per cent of the market and expects to touch five per cent by the end of 2013. However, India continues to be dominated by semi automatic washing machines and the share of automatic washing machines is only 35-40 per cent. Panasonic is only producing fully automatic machines here in India and importing the rest. “We will be importing some tools and die for the semi automatic machines and start assembling them in the manufacturing unit in Aurangabad,” says Sharma. However, the manufacturing of semi automatic is not going to shift to India anytime soon.With the weak festival season for most of the consumer durable companies this year, Panasonic too did not meet its projected revenue targets. The company, which was expecting to do sales of about Rs 1,200 crore, did only Rs 1,000 crore of business this festive season ending on November 15.“We were expecting a growth of 72 per cent over last year’s festive season but we ended up seeing 56 per cent growth over last year,” says Sharma. “The season was mixed for us, we saw good business from bigger cities and higher end products however distribution in smaller cities was a dampener,” he adds.
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Sydney Finkelstein, the Steven Roth Professor of Management at the Tuck School of Business at Dartmouth, has released his annual listing of the worst CEOs of 2012. This is the third year in running that Finkelstein has come out with the worst CEOs' list. This year, five including Best Buy's Brian Dunn, Andrea Jung of Avon and Mark Pincus of Zynga have found their way on the list. Two CEOS who almost (but didn’t) make the list were Facebook’s Mark Zuckerberg, and Groupon’s Andrew Mason.Finkelstein is the author of “Why Smart Executives Fail” (www.whysmartexecutivesfail.com/) and the sequel, “Think Again,” that focuses on why good leaders make bad decisions. Here, he explains why he picked the following CEOs as the big failures this year Topping the list is Brian Dunn, former CEO, Best Buy (resigned April 2012)Stepped down in April after five years of declining stock and loss of market share to Amazon, Wal-Mart, and Apple. Happened to Circuit City, happening again. Showroom to buyers is not a defensible strategy. Led the company in a strategy of up- and cross-selling instead of improving basic customer service and online offerings. Allegations of an inappropriate relationship with a 29-year old subordinate later surfaced. Stock down 50 per cent YTD. Same stores sales down, EPS down, sales down, cash down 85 per cent. Constant use of operation cash to repurchase shares. According to Minyanville, Best Buy has spent $6.4 billion on share buybacks since 2008, which is $360 million higher than where the stock is currently valued. In essence, Dunn and co. completely wasted $6.4 billion in cash that it could direly use right now.In the second place is Aubrey McClendon, CEO, Chesapeake Energy (resigned as chairman, still CEO) CEO of America’s second-largest natural gas producer and champion of hydraulic fracking has a long history of mingling personal and company finances exposed. Often seen as an aggressive visionary, he was forced to sell all but 1% of his shares in 2008 and since then was allowed to run amuck by Chesapeake’s board. The board stripped Aubrey of his Chairman title, but he remains CEO. Stock down 20% YTD. Documents reviewed by The Wall Street Journal show that several major Wall Street banks lent Aubrey money and then received lucrative work as public-offering underwriters or financial advisers to Chesapeake. Personally borrowed $500 million from EIG Global Energy Partners, which had also been a large financer for Chesapeake. In securing personal loans from his company's business associate, McClendon exposed himself to a potential conflict of interest, as it's reasonable to expect him to feel pressure to serve EIG's interests in future corporate transactions, potentially at the expense of the best interests of shareholders. Reuters exposed a $200 million hedge fund trading oil and gas McClendon ran at the same time he was CEO of Chesapeake -- an obvious conflict of interest. Personal piggy bank and conflicts of interest. While all disclosed, actions are opposite of appropriate corporate governance and leadership: Company jets for personal purposes, Chesapeake employees working for McClendon personally, corporate sponsorship deal for Oklahoma Thunder while McClendon was an owner of the team), old friends on board. Reminds me of Rigas family of Adelphia (not disclosed, so they ended up in jail), and other CEOs who couldn’t keep personal and business sides of life separate.Andrea Jung, Chairman of Board, Avon (resigned as CEO April 2012) is third on the list, A long string of poor performance – missing analysts’ estimates, failure to fix operational problems were responsible for her bad performance. Didn’t groom successor; so board went with Sherilyn McCoy, JNJ Vice-Chairman. Marketing capabilities are paramount in a company that needs operational skills to get back on track (like Carly Fiorina). And no COO since 2006. Rejected $10.7 billion offer from Coty (Avon market value in 2004 was $21 billion; today it is $6 billion). Forced to step down as CEO in 2011; is now the Chairman end Dec 2012 (1 year earlier than planned). Weak board that enjoyed working with celebrity CEO. When fired as CEO, kept her on as Chair. When announced resignation at Chair, has contract to stay as senior advisor. Cushy. Stock at $14.50, down 18 per cent on year while Q3 earnings were down 81 per cent. China sales down 31 per cent and dividend was cut 74 per cent. The US Justice Department, Securities and Exchange Commission and Avon’s board are looking into possible violations of the Foreign Corrupt Practices Act, which bars bribery of foreign officials to get or keep business. Avon disclosed the probes in October 2011. In 2011, Avon spent $93 million investigating the bribery scandal. $300m already in legal expenses.Mark Pincus, CEO, Zynga is in the fourth place. To his discredit are the following facts: Stock down 75 per cent YTD. Number of users going up, number of paying customers going down. Incredible exodus of top executive talent, always one of the biggest warning signs for impending disaster. Another incompetent acquisition: OMGPOP for almost $200 million (4x revenue). Writedown of 50per cent of purchase price after 7 months. Unclear why it was necessary to buy this company (makes “Draw Something”) instead of copying it, since there are no barriers to entry. Totally dependent on Facebook for revenues (90per cent ), so that when FB changes Zynga must adapt super-fast. Pincus onloaded 16 million shares after IPO lock-up period ended, not a crime to be sure, but a clear signal on what he thought of the company’s prospects.Rodrigo Rato, President, Bankia (Spain) is fifth on the list. The former finance minister and MD of IMF (2004-2007), extremely well-connected at the top of Spanish and European political and business circles became CEO of Bankia in 2010, resigned in May 2012. Bankia is a new Spanish bank formed from the merger of 7 other banks, as part of the Spanish banking crisis. Promoted the health of Bankia, and sold shares to hundreds of thousands of small investors not long before Bankia was bailed out by Spanish government. 2011 profit announced of 309 million euros, restated to 3 billion euro loss after Rato’s resignation. Rato is now under investigation for fraud. IPO came at a time where management had to know the extent of the damage in the bank. Either it was fraud, or massive incompetence.Mark Zuckerberg, Facebook and Andrew Mason, Groupon are the two CEOs who almost (but didn’t) make the list. 2012 has not been good for both the CEOs, with Groupon’s business model in particular coming under attack.While Facebook stock YTD has fallen 30 per cent, Groupon stock YTD has been down 80 per cent. FB has moved late to mobile, but at least it’s a major focus now. Groupon has a business model without barriers to entry, but at least Mason keeps experimenting with new products.Finkelstein also feels both the CEOs are not mature in a traditional sense. Drinking beer during conference calls; wearing hoodies in all sorts of places does not help the corporate image. Further Finkelstein thinks there’s no reason to believe they have the management skills to run a major public company. He has also cited his massive ego at work as a danger sign.
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Meet The Duggals. They lead a simple life, live in a Delhi Development Authority (DDA) flat (which weren’t really made to look swanky) and own a scooter. Head of the family, Mr D, ekes out a living as a school teacher and adores his wife and tries to be strict with his children. Mrs D loves him back, but she probably loves living it up more. The children are, well, children. They want what they can’t get or have to whine to get. And then, there’s the scooter. Yes, a two-wheeler for four people. That’s middle-class life, right there.In essence, The Duggals are the epitome of middle-class living.When Planman Motion Pictures released Do Dooni Chaar, last year, little did they realise how it will strike a chord with millions of middle-class Indians out there. The film received rave reviews from critics, and the box office numbers added more feathers to its cap. Why was it that there were hordes of people queuing up to watch the movie? Even the youth loved it, which was surprising, given the absence of ‘youth-icons’.What struck a chord with half the population was the feeling that this was their story, playing out on the big screen. Small, primitive flat on rent – check. Two-wheeler for a family of four – check. All signs of basic, simple living – check. An extreme desire to be better-off and live a life of not necessary luxury, but higher than rudimentary living. A car, neither a Maruti, nor a Toyota, but maybe a Hyundai – on loan, of, course. And yes, a flat with a few modern amenities.Meet the Urban Aspirers – The Duggals of real life. Of AspirationsThe term, Urban Aspirers, coined by the Boston Consulting Group in association with the CII, defines what roughly 19 million households are – what is called the Middle Income Group (MIG). They have successfully eked out a place for themselves between the ‘haves’ and the ‘have-nots’.Urban Aspirers constitute a neat 8 per cent of Indian households, preceded only by Strugglers, a whopping 50 per cent, and Small Town and Rural Next Billion at 24 per cent.That translates into an annual household income for Urban Aspirers that falls between $7,400 and $18,500 and ownership (for two-thirds of their population) of basic television, single-door refrigerator or LPG stove.The same is true for less than one-half of the Rural Aspirer population (at 14 million households, 6 per cent of the population). While two-thirds of Urban Aspirers believe, in two years’ time, their lifestyle will be better than what it is now; only 53 per cent of their rural counterparts feel so.Urban Aspirers are typically characterised by their urbaneness, higher spending power and their propensity to spend compared to their rural counterparts. This Aspirer class will be driven by the urge to mimic their Affluent counterparts, but what will set them apart is their relatively watchful approach to discretionary spends.The BCG says some 300-400 million people will migrate to cities over the next 25 years. With this part of the population playing such an important role in the India growth and consumption Story, the Urban Aspirers of today will end up becoming the New Affluents of tomorrow.The one common thread between Aspirers, both Urban and Rural is the dream of owning a house they call their own. The Urban counterparts, with their stable jobs (if not necessarily double income but controlled discretionary spend), are the target audience banks and other lenders look out for, to provide a home loan that stretches for two decades.What also binds these millions together is their hunt for a house that is actually affordable. Given the current housing shortage - conservative estimates put the 11th Five Year Plan (2007-2012) at 26.53 million dwelling units - finding affordable housing is a tricky problem.In a 2010 report on Affordable Housing, global consultancy KPMG and CREDAI broadly defined affordability in buying a house based on three key parameters: income level, size of dwelling unit and affordability.Taking these three parameters, the Urban Aspirers, or the MIG fall into a category that earns INR 3-10 lakh per annum, needs a dwelling unit of 600-1200 square feet in and whose household expenditure to income ratio is less than 5.1 – the dictionary definition of Affordable Housing.A more commonly accepted rationale for affordability is the household expenses to gross income ratio. In the United States, for example, housing affordability means housing costs that do not exceed 30 per cent of a household’s gross income, while in Canada the figure has changed with times – it went from 20 per cent to 25 per cent in the 1950s and finally now at 30pe4 cent. For India, this number is 40per cent.Although, recent data suggest that housing affordability has declined (to 4.6 in FY 11-12, from 22 in ‘94-95), the serious lack of available housing essentially means the prices of dwelling units coming down will take time. The concept of “Affordable Housing” in contrast is applicable across “ALL” income categories. The ‘affordability’ of a household in a given location is an interactive outcome of house price, income, spending & saving behavior. It is recognized that “affordability” is relative to geographical area, time & income category.The Central government tried to define affordable housing by setting up a committee under HDFC chairman Deepak Parekh. The committee has defined affordable housing in two parameters: The minimum area each category of income should be living in and how much should he be paying for that area.Say for example, a 300 sq ft flat is a decent livable area for a driver working in a government or private firm. Then, he should get it at 5 times his annual income which is defined as Rs 60,000 per annum. So he should get a 300 sq ft flat worth Rs 3 lakh somewhere near his area of work. If he cannot get houses at that rate, then we have a problem that the market is not producing products that people could pay.Suburbs like Boisar and Vasind near Mumbai, Talegaon near Pune are areas where developers are focusing, given the availability of land and access to city centres thanks to a growing network of public transport.Urban Aspirers, who typically fall in the middle income category, are set to play a major role in the demand for affordable housing in the coming few years. What this translates into is a housing shortfall of roughly 35 million plus dwelling units in Urban India.With their numbers set to rise to 23 per cent of the population in less than a decade, Urban Aspirers will rule the roost. The BCG suggests Urban Aspirers are going to lead the India Consumption Story in the current decade, with current consumption pattern suggesting that Urban Aspirers account 11 per cent of India’s total consumption ($109 billion out of $991 billion) and rising three times to $358 billion by 2020.With Middle Class India increasing in size over the next decade, there will be many, many more Duggals added to the list. A large number will be looking for a permanent roof over their heads. While the reel-life Duggals were able to temporarily manage a car, Urban Aspirers will unlikely settle for temporary solutions for housing. What is needed, are millions of such affordable houses for the millions of Duggals out there. Are we up to the challenge?(The author of the article is Brotin Banerjee, MD & CEO, Tata Housing )
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