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India Knowledge@Wharton: Is your goal to get to the top? Think football

India Knowledge@Wharton: Is your goal to get to the top? Think football
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First Published: Sat, Apr 21 2007. 09 45 PM IST
Updated: Sat, Apr 21 2007. 09 45 PM IST
When Johan Cruyff led the Dutch team to the runner-up position in the 1974 Fifa World Cup, he was often found in unexpected places. Officially, he played center forward, but in the middle of a game he would suddenly switch roles, moving to the defence while someone else took his position. It was a system called Total Football style of Management (TFM), which required the whole team to have multiple skills.
To adapt this concept to management, you need executives who are equally good at playing different roles. Otherwise, you end up trying to force a lot of square pegs into round holes. That may be one reason why TFM has not become mandatory reading at business schools.
Some organizations swear by it, though. An example is Mumbai-based fast-moving consumer goods (FMCG) company Marico, which had sales of Rs1,144 crore in 2005-06. In a restructuring announced in February, chief financial officer Milind Sarwate took over as the head of human resources and strategy. Vinod Kamath, who earlier headed supply chain and information technology, was named CFO. (The head of HR, whom Sarwate replaced, left the organization to start his own consulting firm.) TFM “stresses teamwork, flexibility and empowerment as the basis for winning business strategies,” says Marico chairman and managing director Harsh Mariwala.
But like every modern mantra, TFM has its pitfalls. “You may not have the inherent experience of the function per se,” says Pradeep Mukherjee, CEO of Mumbai-based HR consultancy Potential Unlimited. “You must make sure you have strong functional people below the function head to take care of this.” The more important issue, says Mukherjee, is that the process has to be managed carefully and the person appointed has to have strong credibility. If not, other employees in that function may feel their group is not valued.
In the US, immigrants and entrepreneurs are increasingly the same
As an immigrant and entrepreneur, Vivek Wadhwa knows a lot of people like himself in the high-tech world of business. “If you work in technology, you see many Indian and Chinese faces,” he says.
But when he set out to quantify the involvement of skilled immigrants in the fields of technology and engineering in the US, even Wadhwa was surprised by what he found. “What started in Silicon Valley has become a nationwide phenomenon,” he notes.
A new study by Wadhwa, an executive in residence at Duke University’s Pratt School of Engineering, and a team of researchers found that one in four technology and engineering companies started in the US between 1995 and 2005 had at least one founder who was foreign-born. Many of them were from India and China. Nationwide, immigrant-founded companies generated $52 billion in sales in 2005 and employed 450,000 people. Non-citizen immigrants living in the US are also increasingly being named as inventors or co-inventors on patents, according to the study.
“This research shows that immigrants have become a significant driving force in the creation of new businesses and intellectual property in the US—and that their contributions have increased over the past decade,” the researchers concluded.
Generous perks offered by Google and others are not always welcome
Free gourmet food, a 24-hour gym, yoga classes, in-house doctor, on-site haircuts, dry cleaner, nutritionist, swimming pool... These are just some of the perks Google—and many other organizations—offer employees.
Companies have their reasons, of course. “These benefits help companies recruit people who are willing to spend most of their time at work,” says Wharton management professor Peter Cappelli. Wharton professor Nancy Rothbard agrees that companies such as Google are looking not only to retain good workers, but also increase productivity. Worries such as childcare, cooking, laundry and visiting the doctor off-site during the week “distract employees at the workplace”, she says.
There are some potential downsides to this strategy, though: Some employees may begin to feel uncomfortable if they see the perks as an impingement by their work lives on their personal lives. According to Rothbard, perks such as Google’s appeal to people for whom work-life and home-life have little distinction. These are the employees who check office email frequently at home on nights and weekends, and who like childcare facilities at or near their office so that they can bring a part of home with them to work. Others “like to keep the two worlds separate”, she says. “It can be frustrating to them. Our world is now becoming much more integrationist, with technology that makes you on call 24-7,” she adds.
Cutting jobs as corporate strategy
Layoffs. Downsizing. Rightsizing. Job cuts. Separations. Terminations. Workforce reductions. Off-shoring. Outsourcing.
Whatever the term, getting rid of employees can be a necessary strategic move for companies to make. Layoffs can signal that a company is reorganizing and moving in a more profitable direction and, as a result, give Wall Street a reason to cheer and improve the morale of remaining employees. But unless job cuts are handled and explained properly—and are indeed necessary to achieve a thoughtful, overarching purpose—the solution may cause as many headaches as the ailment it was meant to cure.
According to Wharton management professor Michael Useem, research has shown that if a company announces a downsizing without a broader reference to a strategic plan, its stock price will, on average, drop 5% to 6% over the next several days. By contrast, if large-scale job cuts are announced as part of a broader restructuring, and a strategic plan is laid out, the firm’s stock will rise some 4%, on average, in the days following the announcement. Useem says the research shows that, contrary to popular wisdom, Wall Street does not always welcome job cuts for their own sake.
“The tough-minded, big institutional equity market is actually skittish and worried about downsizings that are simply short-term cost-cutting measures without a broader plan described behind them,” Useem notes. “Investors are not beating the drum for downsizing as much as it is sometimes said they are. It really is the restructuring they are applauding, not the particular method within it. It’s helpful to think about downsizing as restoration—cutting costs as a move to restore lustre and performance.”
The way people are treated during a downsizing is a “testament of the values and soul of a company”, adds Useem. Companies should engage in as much transparency as possible, he says. “Good morale is essential. If top and middle management work with the people who remain, it can be a vital formula for ensuring that the people who are survivors get behind the new, leaner company, and achieve the results top management wants to achieve.”
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First Published: Sat, Apr 21 2007. 09 45 PM IST
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