'It is not enough to say my mind is flexible'

Are you an organisation which believes in reward mechanisms based on stringent KPIs? It may not be a good idea in an environment of constant change. One has to create an organisation structure that is flexible and empowering, says business consultant, author and CEO advisor, Ram Charan, in an interview with Fortune India.

Excerpts:

These are uncertain times, but uncertainty has become a way of life in the past few years. What would be your advice to corporations across the board to build strong, sustainable businesses in an era when uncertainty and volatility are a given?

As this uncertainty would continue you need to be continuously prepared for it. It is about how you either adapt to it or take advantage of it. It is a universal principle that only people, talent or an organisation’s leadership will steer the organisation. So, what do they need to do? One foot of the top leader has to be in the future, and one has to be delivering the present. It is not enough to say my mind is flexible, the flexibility in the mind needs to get converted into sticking out what’s happening and what’s not happening.

The second part is that only the people in the organisation are going to adapt the new structure you have created, and you need to facilitate their adaptation. We say what causes rigidity is KPI and reward systems. Unless you make it flexible, it will not work. You have to empower your people. All this is preparing your machinery which way to adapt, which way to take advantage. Then there are business decisions which have to be looked at, which are normal portfolio change and capital allocation. The most difficult one is changing the mindsets of your people who are used to the old ways of working and getting rewarded.

Today many companies, especially in the tech world, are indiscriminately laying off people. They first went overboard hiring and suddenly they realise that they don’t need so many people. Where have they gone wrong?

Going overboard in hiring is not the first time. The key here is that the federal reserve missed it, it didn’t pick up the thing in time and now we are paying the penalty. It’s normal, that’s why the term ‘cycles’ is used. If you are an investor you have to pay attention to the infallibility of the fact, but the cycles will come. You have heard about taking people out of Microsoft, I don’t think you are going to hear that kind of thing from Apple, they spend time daily looking at the people front.

Marico Chairman, Harsh Mariwala, has instituted a chair in your honour for doing research in strategy and innovation at the Indian Institute of Management, Bengaluru. There is a lot of talk about business schools losing their relevance, do you agree?

Just like any organisation, business schools need to be ahead of the curve not behind and one of the ways to be ahead of the curve is that the faculty needs to link more with the business people’s needs. If the faculty doesn’t link with the business people’s needs, it’s difficult to be ahead of the curve. You can do research behind the ivory towers but business schools have a mission of improving the practice of business and innovating in business. They need the right kind of linkage to know the aspirations and the issues and the problems businesses are facing. It shouldn’t be just India but the global context. India is affected and it is also affecting the globe. Prime Minister, Narendra Modi, is influential in some of the global affairs and India is affected by global affairs and Indians can also influence. So, our leaders of the future have to be business focused and not just politicians. They need to be more than just a leader.

How do business school curriculums need to evolve?

So, this whole area of what is new and what is coming, be ahead and experiment with the new curriculum. When you innovate your curriculum, it is not going to happen that you are 100% correct. You may run a new course, it may not work, so try again. I would like to see more participation in the teaching as well as in course design by the practising people. They may not know the teaching methodology, but they do know the problems and aspirations, they know what issues are going to come up and we don’t have answers.

What has changed is the ubiquity of the internet, which has opened the sphere. Anybody with a computer and an idea can start up, and many of these start-up founders are not MBAs. Therefore, business schools need to get their students to perform better and get them through a higher rate of success. It’s all about are we producing them for something that is for the past or are we producing talent which has capabilities to deal with global tensions, the volatile recurring environment. It’s about how we infuse these skills into the ‘practise of business’, and this is not an India problem alone. It is a global dilemma.

What kind of a role would research play in making business schools ahead of the curve?

Arbitrarily, I am dividing research into two groups – regression-based research and field research. In the former, they want to prove how I can use a particular tool, but they pick up a not very relevant topic, neither is the output too relevant (most business schools do regression analysis research). Field research is the need of the hour. The dean of IIM-B said, we want to learn how to scale up a start-up. The question is clear. We said take four companies, two successful start-ups and two which didn’t succeed, and go all the way, history, details, outline their context, figure out issues and then create a set of questions that most people can use, versus taking a data of 5,000 companies and doing regression analysis.

Isn’t field research expensive? Will institutions be able to pull it off unless they get outside funding?

If you do field research, you will get more value, you are going to get something useful for the business, the faculty will learn a ton and that research will be read by many other faculties. This may be expensive, but the issue is not more money to be invested but changing the faculty’s mindset. Research is necessary for the faculty to be ahead of the curve. And, if it is field research, people from outside the institution will be willing to fund it.

Take the example of the research that we (me and Mr Mariwala) are going to do in IIM-B. One of the topics that has been identified is challenges in scaling up. We are going to look into how organisations select an idea and convert that into a proposition and then depending on the success of the proposition, how do they scale up from small to medium to large; what are the shifts that one needs to make in this journey; who can we rely on for examples of successful scale-ups and learnings from some failures. It will be a combination of research. Or, go to 5-6 companies which have done well in scaling up and what have they done right. This could culminate into either a report or a book. I have no doubt that if this goes along or if it looks very promising and needs more funding, it will be available.

The academia needs a significant dose of papers being published in journals. On the other hand, businesses also need to give importance to research done by the academia. Most business people can’t even name the journals let alone reading them, so that needs to change. In my time, Harvard Business School didn’t recognise the publications in HBR, they were not referring to it and it was their own backyard. We need to attack that part of it too.