THE I FACTOR

R. Uppili & Sricharan M.

Survival and success in today’s competitive world demand commitment, dedication and passion. Indeed! but the industrial atmosphere requires an additional “I-FACTOR” as we call it. This factor is “internal “ which simply distinguishes the ordinary from the extra ordinary. The internal force is present in various forms and must be understood in those forms. The I-Factor can be analysed from the perspective of  a leader, government and  industry.

The I-Factor takes the form of internal motivation in case of a leader. This can be well understood by the statement made by Dan Kaplan, CEO of Hertz equipment rental corporation-“ I know who I was, who I am and where I want to be”. There is no doubt that the world will step aside for a man who knows where he is walking.

The name that strikes you spontaneously in this context is our own A.P.J. Abdul  Kalam. In his autobiography “Wings Of Fire” he mentions that his thirst for success and the desire to learn and grow were the factors that kept him going. “I desired to feel more, learn more, express more. I desire to grow, improve, purify, expand. I never used any outside influence to influence my career. All I had was the inner urge to seek more within myself”. This is what he said.

Success of a leader through internal motivation could be definitely passed on to its organisation. In fact Dr.Maeda, Chairman of the 3.75 Billion construction giant believes that before the organisation can come up with a break through strategy, the leader must have had a personal break through himself.

The result of those who do not build their companies with a strong foundation of internal motivation would definitely be bankruptcy. What went wrong with companies like ENRON, WORLDCOM and ADELPHIA is that the leaders themselves had not achieved a personal break through and tried to impose it on their respective organisation.

Most of the companies above mentioned believed in incentives rather than initiatives. Unfortunately they failed to realise that incentives are only a temporary solution to a problem which assumes complex proportions later on. A case in point is the Employee Stock Option Scheme which did not foster initiatives but enticed employees. A simple lesson when failed to be learnt becomes really costly.

Initiatives have a long term productivity because of a mixture of emotions like passion and hard work. This adds a touch of human element to the whole scenario.

Shiv Khera in his book “YOU CAN WIN” gives an anecdote. A man who made living by selling balloons at a fair, had all colours of balloons including red, yellow, blue and green. A little boy asked, if you release the black balloon, would that also fly? Moved by boys concern the man replied with empathy, “Son it is not the colour of balloon, it is what is inside which counts”.

The internal government policies towards the industries is the turn that the I Factor takes when analysing the laws of the government.

The standard economic theory tells us that profit strategies should be based on innovation of new products and production techniques rather than restricting market competition. Under the “License Permit Raj” in India, however innovation and efficiency hardly had any role to play. Once the license was obtained, profits for a company were assured through a captive market. As a result, the core-competence of most firms were their ability to lobby government rather than gaining expertise in business activities.

As a result firms did not create effective entry barriers like scale, innovation, differentiation, brand etc. The result of licensing diminished the possibility of new entrants. The bargaining powers of buyers were reduced to a great extent. On the whole, it destroyed the industrial structure of the country. Most of the firms failed to see the advantage of globalisation and played to the tune of the government policies. They did not focus on competitiveness and on creating effective entry barriers.

A case that is relevant at this juncture is that of the Indian Steel Industry. In the pre-liberalisation era, the licensing and price control choked the growth of Indian Steel  Industry. The Government of India exerted full control over new capacity creation and investment in the steel sector, through compulsory licensing and approval of any such investment. As the steel industry was one of the key sectors, they were completely regulated by the Government. It was administered through a quota system, where in the likely availability of steel for a particular sector was predetermined by the Government based on the targeted growth of that sector. The import duty of finished steel product ranged between 50% to 85%. In the pre-liberalisation era the Indian Steel Industry was dominated by two players only, namely, Steel Authority Of India Limited and Tata Iron And Steel Company. Investment in new ventures and expansion were under the state appointed bodies. This constraint stopped the steel companies from investing the surplus in growth and modernisation. Hence there was not much competition between the existing players in  terms of increasing market share through cost reduction or innovation. Hence there was very little competition which led to compromise in quality.

The dawn of globalisation reduced the role of Government in rent seeking activities. Price deregulation and reduction of import duty were the entry
barriers and saw the beginning of competition. This increased the total installed capacity for the steel production from 17.75 MT in 1991 to 246 MT in 1997. The import tariffs were reduced from a massive high of 75% in 1991 to 30% in 1997. This forced steel players to control the cost of production and improve the quality of their products. The period witnessed the entry of new players and also increased rivalry in the Indian steel sector. The opportunities presented by globalisation were not utilised by the Indian firms due to Government’s internal policy which neither encouraged competition among existing players nor played the role of allowing competition from other countries. This created a lacuna between the Indian Industries and the Industries world over. The Government policy of protection from competition has killed the entrepreneurial spirit of industries. There are a few exceptions like Reliance and Tata Group which had visionary leadership to overcome these hurdles.

When analysing the industry, the “I Factor” is to be understood in terms of internal organisation system which nurse the employees.

This is the era of rapid change and discontinuity. Firms are unable to understand and predict as to in which form competition might emerge and affect their profitability. In order to face this hyper competitive world, the firms which are deep rooted in terms of success are those which use their internal resources. These internal resources in the form of employees are their greatest asset. Bill Gates rightly said “ the only factory we have is human imagination”. The so called strong companies have one similarity. They make best use of their most valuable asset, that is human capital. These companies never compromise on their recruitment strategy and spend a lot of time in search of bright talent. Companies are well aware of the formula that happy employees would lead to happy customers and in turn to happy share holders. In the present time organisations depend on three major factors namely human capital, organisations capabilities and core competencies. These three go hand in hand in the sense that organisational capabilities and core competence require the right blend of human capital to be created and sustained by the corporation. The job is not simply over with the identifying right kind of human capital. The factors of organisational capabilities and core competence require the right blend of internal organisation system and management styles which need to nurse the human capital.

Jack Welch was quoted saying, “the talents of our people are greatly under estimated and their skills are under utilised. Our biggest task is to fundamentally redefine our relationship with our employees. The objective is to build a place where people have the freedom to be creative, where they feel the real sense of accomplishment- a place that brings out the best in everybody”.

Infosys has institutionalised  the process of making selective investment by encouraging budding entrepreneurs within the organisation. This helps the company not only to retain individuals with conceptual abilities but also benefit from their entrepreneurial thinking efforts. They have created knowledge currency units which employees can earn for contributing towards knowledge sharing which can be accumulated and encashed by employees. Such initiatives allow the company not only to shape the skills but also motivate them to contribute to the profitability. Another example would be A.V.BIRLA Group’s chairman Kumara Mangalam Birla. He took personal interest to invest Rs.20 Crores  in setting up a management development training centre “ GYANODYA” at the peak of recession in1999. Another initiative was getting the faculty from Wharton Business School to help in shaping the career of employees.

The disinvestment Minister Arun Shourie has shown that it is the people who shape a system. There can be no control over the external environment so it becomes doubly important to gain control over the I-Factor.

R. Uppili & Sricharan M.
Students

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