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Why companies love a long innings

Why companies love a long innings
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First Published: Mon, Apr 11 2011. 10 26 PM IST
Updated: Mon, Apr 11 2011. 10 26 PM IST
Some years ago, a senior HR professional at ICICI Bank commented that increasing careerism and job opportunities had made new employees of large firms unwilling to learn the ropes before becoming useful workers. As a result, people were merely hopping from job to job without enriching themselves professionally or even introspecting about their contribution to their organizations. Although this is part of a larger social change, big companies are faced with a problem.
Many small firms set up in the early 1990s in India have grown larger. Consequently, these now offer slower growth opportunities. For a growing country, it is important that its best organizations retain a certain level of engagement with their employees. In addition, large firms have found that the probability of success increases through the use of homegrown talent.
This can seem counterintuitive, especially if public imagination and media space are captured more by cross company movements than by long-term stays at a workplace. One could be forgiven for thinking that organizations find little value in homegrown managers. In practice, successful large companies favour recruiting from their existing employee pools for critical positions. There are several reasons why the real world behaves differently from what gets written about.
First, these companies tend to be custodians of shareholder funds. They have a fiduciary duty to ensure that people who take decisions are ones who they can trust and vouch for. This is easier if you know these people personally and have been able to test their judgment in specific situations.
Second, one of the key tenets of management is the ability to hold managers accountable for their actions. Companies dislike the possibility of an individual harming it and then simply moving out. This is best avoided by having long-stayers for whom the exit bar is likely to be higher.
Finally, all organizations are institutional frameworks of processes that work together to maximize value. To do that, one needs to have a significant level of understanding of internal workings and a strong interpersonal equation with other key decision-makers in the organization. People who have remained with the company for long enough are always going to be better at that.
It is then fair to say that any firm is more likely to succeed if it is able to retain top quality managers and nurture them over a period. This characteristic runs through some of the greatest companies in the country, where success has generally been driven by long-standing managers.
While it may sometimes seem more attractive for an individual to change jobs quickly, this may not work for an organization. Companies look for stability, accountability and knowledge, which can together make them tick. Ironically, the market does not always help. It can often ignore track records in accountability, credibility or managerial effectiveness, and reward visibility and personal branding, which often bear little relationship to shareholder value or management skill.
Larger pay cheques don’t solve this conundrum, in which persistent job-hopping can prove individually lucrative but organizationally sub-optimal. Complex and economically critical institutions cannot always be the best paymasters. However, a professional manager needs to decide whether she wants to look back on her career as a sequence of unfulfilled moves or as one where she built an institution.
Firms must highlight this fundamental distinction ever more strongly to their executives. Making employees see themselves as institution builders and not job hoppers can help retain them over longer periods, and this can be one of the best investments a company ever makes.
Govind Sankaranarayanan is chief financial officer and chief operating officer, corporate affairs, Tata Capital. He writes on issues of governance
Comments are welcome at otherviews@livemint.com
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First Published: Mon, Apr 11 2011. 10 26 PM IST