Managing organizational & management challenges in India

National Competition for Young Managers 2010

Authors:
Vijay Porwal Neelam Chhattisgarh Aditya Deshmukh NTPC, Sipat Bilaspur,

Managing organizational and management challenges in India

NCYM 2010

1. ABSTRACT

Organizations are confronting a wide range of organizational challenges presented by new economic and social trends. Understanding organizational challenges are at the heart of strategic plans. There are challenges everywhere both in and outside the organizational boundaries. Clarity of challenges enables an organization to assess probability of achieving goals, and formulating plans to remove the road blocks on the way, identifying latent opportunities in the challenges- challenges are a pack of hidden opportunities. Organization challenges when addressed proactively provide a company with opportunity for creating future else can spell a disaster. This report presents some of these challenges which are confronted by Indian companies and suggests possible solutions to overcome these challenges.
2. INTRODUCTION
CHANGE IS THE ONLY CONSTANT, SAYS THE BHAGVAD GITA

India has entered a phase of accelerated growth. Over the last decade and a half India has been transformed; but in the coming decade and a half, India will be an economic superpower. This change is evident in recent M&A activities and global forays of Indian companies and is now being recognized. The growth of Indian companies is becoming a subject of discussion in corporate board rooms in USA and Europe. Leveraging the nations comparative advantage of knowledge, Indian companies have grown through acquisitions, have built best in class competency and have become large scale players. But this growth can be marked as outcome of initial reforms implemented by government and a vast Indian middle class consumer base. But the road ahead is much more complex than ever. To survive in long term they have to think differently. The nation has to add value by creating new products, services and processes by radically altering the way it does business. 3. MANAGEMENT CHALLENGES IN INDIA
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When an elephant attempts to change course, it takes a while for it to align its massive Frame with the massive frame with the new course. While liberalized India has grown past its initial struggle, it still has to travel some distance before it regains its equilibrium on the new path. We still face some transitional difficulties- be it poor infrastructure or a regulatory malfunction or a taxation anomaly.
INFRASTRUCTURE

Inadequate infrastructure is a real challenge, this is particularly so when import tariffs have fallen sharply over the years, exposing Indian producers to competitors located in more efficient eco system. With virtually no mass transit in Bangalore, Indian technology firm Infosys Technologies Ltd. spends $5 million a year on buses, minivans and taxis to transport its 18,000 employees to and from Electronics City and traffic jams mean workers can spend upwards of four hours commuting each day.
GLOBALIZATION

Recent slowdown has produced an opportunity to expand globally. Corporate valuations are at historic low. Indian organizations are on shopping worldwide. Tata Steel, Hindalco, Suzlon, Bharat Forge, and Sundram Fasteners are typical examples of such Indian companies. To spread its wings to set up operations in various markets around the world Indian organizations have to transform themselves to become global giants. Following are the implications for the Indian organizations:
THE DOMINANCE OF THE CUSTOMER :

over the companies is becoming a key concern before organizations. Due to ease of availability of information through various media like internet, T.V has resulted in a vast shift in power away from the companies, and towards the customer. Brand represents the sum of all valuable qualities of a product to the consumer. As many choices are available before customers the brand of the product has become significantly important because its brand image only which force them to make their choices over the other brands.
THE IMPORTANCE OF THE BRAND :

Emerging dominance of the customer

Manager of Indian company must be open minded, comfort with diversity, have integrity and abstract thinking and risk taking capability.
THE NEED FOR A GLOBAL MINDSET :

INDIAN POLITICAL SYSTEM AND BUREAUCRACY

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Managing organizational and management challenges in India

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The bureaucratic machinery of India is corroded with apathy and corruption. The time it takes to obtain a business license in India ranges from 159 days in Bhubaneswar to 522 days in Ranchi. No wonder that the 2009 World Bank report on ease of doing business in different countries ranked India at 122. To restrain business and profiteering while increasing ethical practices and good governance in companies, the government frequently increasing regulations. Many of the new regulations become a source of revenues for corrupt administrator and extra cost for business, without actually producing the intended benefits in terms of behavior change.
LACK OF INNOVATION Innovation in a country depends on the sophistication and value creating initiatives of its enterprises. To illustrate where India stands, the total number of international patents filed by Indias top 20 organization in a period of 5 years is less than MITs patents output for the same period. The per capita patenting output of India is highly insignificant when compared to countries like Taiwan. In the name of innovation Indian companies have been flirting with incremental improvements by tweaking their processes, adopting best practices and fiddling with a few aspects of their value chain. Finally radical or disruptive innovation, attempts to develop new products, services , processes or business models for the markets, which have the potential to transform new economics of the business and disrupt the establish players. The reason for this is a combination of historical factors and the lack of necessary inputs for a culture of innovation to thrive. ENVIRONMENT CONCERNS & COPENHAGEN ACCORD

In the path of rapid industrialization India has to cope up with international community on the issue of global warming. In recent Copenhagen summit India was one of the BASIC country which signed accord for voluntary reduction of emission till 2020. In India main source of pollution is energy sector which is still facing shortfall of 10-12% by demand. Keeping in the view of growth target of India it will be very difficult for it to reduce emissions.
4. LESSONS FROM HISTORY

Arie De Geus in his title The Living Company pointed out some basic traits about for long survival of company. Companies like DUPONT, Store has survived centuries. He called them Living Company. MNCs are like living companies because they have to work across the world in different cultures.
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The manager of a living company must place commitment to people before assets, respect for innovation before devotion to policy, and the messiness of learning before orderly procedures and the perpetuation of the community before all other concerns. In India now with changing economic conditions mindset of institutions are also changing. Government is building infrastructure but pace is slow. India is a democratic country in which we have diversity in culture and geopolitics. To prosper in India Company should be capable of managing change. Just like living companies which have survived while war, depressions, and politics surged and ebbed, Indian companies must build themselves as strong to face present and future challenges. We have listed out some strategies to tackle change.

5. RESTRUCTURING / REORGANIZATION OF BUSINESSES

The global markets emphasize value adds, innovation, flexibility, excellence and customized products and services. The Indian business houses must restructure resources and processes for maximizing profits.
BUILDING CORE COMPETENCIES

Many emerging Indian companies have decided to refocus on core competencies while outsourcing or shedding off secondary operations.
1. Bharti has outsourced its customer service to 4 different regional players to keep its customers services strong and concentrate on core business. 2. ONGC Videsh. It was created out of ONGC and now focuses only on oil exploration and acquisition

MERGER & ACQUISITIONS AND CONSOLIDATIONS

Companies consolidate and grow largest to gain larger and diverse markets shares and build a global brand. The profits and economies of scale help them ward off tough competition.
1. Bharti Zain deal

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2. Tata Chemicals and Coromandel have emerged as integrated fertilizer companies with portfolios comprising both urea and phosphates fertilizers.

INVESTMENT IN R&D Many Indian companies realize the need to focus on innovating new products and services. This requires allocating a major chunk for R&D activities. Tatas Nano, Iflex solution in IT, Dr. Reddy in pharmaceuticals are major examples of Indian initiatives in R&D. REAPING CROSS BORDER SYNERGY

Interregional trade agreements are in vogue these days. These foster better supply of goods and markets for finished products. A company can open different subsidiaries in different countries to optimize on labor, cost and returns. Interregional frameworks can also lead to self trade and less dependence on other powerful countries.

6. KEEPING SYNERGY WITH ENVIRONMENT This new environment era is a real challenge for companies which now have to find a way to deal at the same time with economic growth and environment protection. Company have to take proactive step to improve their environment practice at each stage of there supply chain.
NTPC Ltd is second largest tree owner after forest department in INDIA.

Companies should think about total quality management. Improve their standards, adopt newer and environmental friendly procedures for sustainable development. Government is also promoting environment friendly initiatives just like wind power development, sea water utilization, forestation, CDM etc.
7. CORPORATE SOCIAL RESPONSIBILITY

CSR can be defined as the economical, legal, ethical and discretionary expectation that society has of organization at a given point of time. CSR is a win win scene for organization. An organization can not prosper in an underdeveloped country. It has to make its own customer base for selling of products, it has to build institutions to build talent pool to run its operations, it has to develop surrounding to sustain.
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In India Tatas are famous for their society initiatives, they have provided world class institutes like IISc, cities like Jamshedpur to India.

Many industrial complexes are naxalites affected areas; CSR is the only solution of naxalism. Companies should improve their image that doing business is not a sin. Businessmen are not bad human beings. Investment in society development is investment in future. 8. KEEPING ABREAST WITH IT One cannot compete successfully in global market unless he can reveal business information from many sources. Today business environment is very unpredictable because of advantage of technologies, disappearance of national boundaries and market along with varied expectations of customers. Customer, competition and change (3C) are the three forces, which individually as well as in combination, is driving todays companies in unfamiliar troubles. No organization can afford to overlook any one of them. Onslaught of 3 C can be combated with 3I (Information, Integration and involvement of stake holder).In order to retain the competitive edge the companies should change their traditional way of doing business. Benefit of IT driven business transformation initiatives can be very tangible .Many organization have initiated project on IT driven business transformation. 9. BUILDING OF STRONG BRAND IMAGE In todays business scenario brand image of any product or company plays most vital role in the success of business it helps to identify the potential buyers and investors and communicate the message across through the memorable lines of advertisement like KAR LO DUNIA MUTHI ME (Reliance), WE ALSO MAKE STEEL (TISCO). Company CSR practices sticking to core values, customer focus, Organizational behaviors makes a strong brand image. To enhance brand image at national and international level a company need to advertise properly and sponsor national and international mega events while venturing in to the global arena. IPL is biggest example of this type of event. DEVELOPING ORGANIZATIONAL CULTURE/MANAGING ORGANIZATIONAL CHALLENGES
10.

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Managing organizational and management challenges in India

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The best employers inspire and maintain a passion for outstanding achievement. They not only pose sharp focus and clarity but also share it simply and effectively with employee. -Mike Bennette, Managing Director, Asia Pacific

Organizational culture is the way in which an organization performs its tasks, the way its people think, feel and act in response to opportunities and threats, the way in which objectives and strategies are set and decisions made. Enabling organizational culture is vibrant and dynamic organizational cultures, where employees offer co-operation to one another, remain committed to their organization and value customers. And fostering such enabling organizational culture is the greatest challenge, which organizations are facing today. Plethora of the survey has been conducted to determine factors behind enabling organizational culture. Following are the major cultural enablers we have listed out.
LEADERSHIP DEVELOPMENT

Leadership is a phenomenon in which person helps in transcending organization from the present undesirable situation to desirable situation. The leader recognizes that his functions have to be futuristic, for the organization to be ahead of time. The leader gives values to social capital i.e. human connections, trust, personal networks and community role, which plays a major part in the successful running of the organizations. In companies implemented. a formal leadership development process should be

TRANSPARENT AND SINCERE COMMUNICATION SYSTEM

If organizations are human body then channels of communication form its veins. In India and especially in governmental undertakings communication is not only lengthy but also leads to red tapism and delay in some very important work. Transparency generates trust and esprit-de-corps among employee at all levels. Companies should introduce system of frequent communication by business head/ CMD regarding companys performance, challenges, opportunities, business plan etc. through electronic media.
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Actions and instructions should be accompanied with the intent behind them to generate more accountability
DIVERSITY MANAGEMENT

Organizations are becoming increasingly cosmopolitan. A typical organization is emerging as a place of diverse workforce in terms of gender, race and ethnicity. Managing diversity is an on-going process that explore the various talents and capabilities which a diverse population bring to an organization, community or society, so as to create a wholesome, inclusive environment, that is safe for differences, enables people to reject rejection, celebrates diversity, and maximizes the full potential of all, in a cultural context where everyone benefits from Multiculturalism, as the art of managing diversity, is an inclusive process where no one is left out.

STRONG COMMITMENT TO STAKEHOLDERS

Three major stakeholders of an organization are shareholders, employees and the customers. Each one of them has distinct expectations from the organization and managing their expectations is biggest challenge in front of organizations.
There are three basic elements of wall marts work culture, respect for individual, customer service and striving for excellence. Its culture is identified with a very strong customer service orientation.

SHARED VISION, MISSION, VALUES AND OBJECTIVES

Shared vision and value means building people around a common identity. Such a vision commands commitment and not compliance. A strong and enabling culture is created when all the employees believe in and practice common values and also when there is a perfect fit between organizational and personal values.
MOTIVATION AND COMMITMENT

Motivation is a favorite topic of the behaviorlists. All management challenges are centered around-how to motivate employees? Todays management
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mantra is , people work for money but need love, care, praise and recognition to go to that extra mile and this sums up the challenge of making high levels of motivation and commitment an integral part of culture.
KNOWLEDGE MANAGEMENT AND EMPOWERMENT

Knowledge management involves strategic & process of identifying, capturing & leveraging knowledge to enhance competitiveness. Converting raw information to develop a knowledge base and empowering people through it is important to achieve organizations aim. 11.
1.1.

NTPC A CASE STUDY COMPANY OVERVIEW

National Thermal Power Corporation Ltd. (NTPC), established in 1975, is a global giant in the power sector with an objective to accelerate the electricity generation by planning, promoting and organizing integrated development of thermal power in India. As on date, the installed capacity of NTPC is 31,134 MW and it contributes more than 28% of the total power produced in India. The company has also set a goal of having 50,000 MW of installed capacity by 2012 and 75,000 MW by 2017. The company has taken many steps like step-up its recruitment, reviewing feasibilities of various sites for project implementations etc. and has been quite successful till date.

1.2. SWOT ANALYSIS Strengths Weaknesses 1. Largest market share in 1. Low risk diversification - business domestic power generation with portfolio consists primarily of excellent track record generation assets 2. Broad customer portfolio across 2. Poor financial health of the country customers
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MAHARATNA status 4. Highly skilled and experienced human resources 5. Strong balance sheet 6. Thrust on reducing social cost of capacity growth- strong execution of R&R plans.
3.

3. Functional orientation hampering cross functional perspective in decision making 4. Long and multilayered procurement process 5. Gaps in HR systems such as performance management, rewards and incentives and career development 6. Greater hierarchy for decision making

Opportunities Threats 1. Broad base fuel mix by 1. Limited experience of operating in considering imported coal, gas, a truly liberalized environment domestic coal, nuclear power etc with competition with a view to mitigate fuel risks 2. Downward regulatory and 2. Expand services for EPC, R&M competitive pressure on tariffs and O&M activities in the domestic 3. Stringent environmental norms as well as international markets in the future may add to the cost 3. Forward and Backward of generation integration to exercise greater 4. Absence of an independent control and understanding of regulator for coal industry and the supply economics delay in private investments 4. Improve collections by direct lending to the risk of low sale to bulk customers availability of coal in the future 1.3. CHALLENGES FACED BY NTPC DUE TO CHANGING TRENDS With changing trends in the Indian power sector, several challenges pose threats to NTPC. It has to cope with the competition from private power producers. Increasing social responsibility and stricter environmental reforms increased the cost of production. Expansion of facilities like plants, regional offices and headquarters calls for an integrated system of operations and management. Following sub-sections describe a few organizational challenges faced by NTPC. Company has already taken steps to tackle some of the problems and some areas still need to be addressed. Project Disha and Project Lakshya are examples of such reforms taken up by the company.

1.4. PROJECT DISHA

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Managing organizational and management challenges in India

NCYM 2010

The NTPC has recently come out with a road map for organizational transformation under the name Project Disha. Project Disha is a comprehensive organization transformation project with a view to positioning the NTPC as a globally comparable utility, aligned with global best practices in various areas of its processes and functions. The project is focused on important areas, such as core business strategy, portfolio diversification, globalization, services business model, IT strategy, structural initiatives, planning process, unit level processes (maintenance, procurement and inventory), engineering initiatives, project planning and execution, performance management system, rewards and incentives, career development system and knowledge management system. As part of Disha, NTPC is implementing an enterprise resource-planning (ERP) project called Lakshya.
11.5. PROJECT LAKSHYA

The Enterprise Resource Planning (ERP) initiative is likely to impart a cutting edge to the company in terms of increased efficiency, quicker response to stakeholders' demands, flexibility and transparency. Through its implementation organization has achieved: General o Adoption of best practices and procedures o More productive time for managerial and strategic decision making o Increase in access to integrated data for business decision making Business specific o Effective cost / budgetary control o Fast and accurate reconciliation of project expenditure with built-up assets and faster completion of projects o Reduction in inventory o Online visibility of status on procurement, stocks, easy search, payment status etc.
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Managing organizational and management challenges in India

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o Better maintenance equipment availability

practices,

leading

to

improved

NTPC has major thrust on total quality management. NTPC has adopted business excellence model. NTPC has pioneered in CSR, Environment management, Customer satisfaction and employee development. NTPC is also helping some of the government initiative like improving SEBs performance by which NTPC is its return of dues on SEBs.

11.6. BROAD STRATEGIES FOR NTPC

Increase hydro and nuclear generation in the business portfolio Restructuring the company - Segregation of the businesses as coal, gas, hydro, nuclear etc. - Identification of Strategic Business Units - Each project shall be a profit centre

New projects in neighboring countries Become a global player in the generation business in deregulating and emerging markets Strategic partnerships for hydro and nuclear businesses Strategic Human Resource Management Backward integration - Captive coal mines - LNG business and Gas exploration

Forward integration into distribution business. CONCLUSION

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With whole world getting economically mingled, Indian companies needs a revamp to sustain their market leader positions. Companies such as NTPC should focus to adapt to new IT infrastructure, new technologies and better HR policies. Government is taking initiatives by providing infrastructure, making policies in favor of business and improving education system of India As India moves from a delivery-driven economy to a market-driven economy, with functional organizations giving way to Business Units, Cost-based decisions to Value-based decisions, Global Focus needs to be reinforced, reiterating its commitment to become a powerful nation in this knowledge century

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