First priority: Human capital

“You can take my factories, burn up my buildings, but give me my people and I’ll build the business right back again.”

—Henry Ford

Have you heard of Minal Dakhave Bhosale? She is a virologist in a little known Lab called Mylabs in Pune. She headed a team that developed a test kit that detects Covid-19 in 2.5 hours, much faster than imported ones (6-7 hours). They developed it in record time, too: 6 weeks. What is more, she prioritised this over her pregnancy. She delivered her child a day after the kit was submitted for approval. This story is not so much about pathological tests. It’s about human ingenuity, perseverance and value-add—the stuff which epitomises the true worth of human capital. Study this example closely: A woman, from a non-metro area, from a lesser known lab, STEM-skilled and determined—all hallmarks of the new face of human capital in India. If we can somehow preserve and tap into this unique human energy in our country, India Inc. will definitely recover from the Coronavirus crisis faster than others.

The pandemic will pass. But recovering from its trauma will not be as easy as washing hands every hour. The challenges of preserving the human capital after this pandemic will be a true test for India Inc. Will some of our businesses get back to their old habits of sacrificing people (jobs and wages) at the altar of profits and growth? Or, will better sense prevail?

In times of economic crisis, India Inc., like the rest of the corporate world globally, could groupthink into prioritising shareholders over employees. Faced with a severe cash crunch, huge supply chain outages, near-zero demand and global recession, companies could resort to the usual ‘slash and burn’. We have seen this drama before, of course not at this scale and suddenness. But our instincts tell us we will do what we have always done: Take the short cut of cutting people investments. Hegel, the early 19th century German philosopher rightly said: ”The only thing we learn from history is that we learn nothing from history.”

For us to do anything different, we need to re-think at two levels simultaneously: i) macro policy level initiatives and ii) micro firm level actions.

At the national level, we started on a good note. The government decisively chose lives over economy (when many biggies hesitated) and resorted to the only choice it had: lockdown. A series of thoughtful initiatives followed. Firms were advised not to lay off people or stop paying wages. That was followed up with several concrete measures of giving cash and food grains in the hands of the poor and the vulnerable. It was heart-warming to see state governments and the centre work in tandem to address the needs of the needy including those in small businesses and the vast informal sector of India. The speed with which a slew of policy measures were announced by the center and states around wages, PF, ESI, EMIs, Apprentices, liquidity, loans, banking, etc. have taken many citizens by pleasant surprise and has reinforced faith in the nation’s ability to rise to the occasion. However, given our scale and a rather laissez faire mindset, there will be many a slip between the cup and the lip. The policy directions will not percolate to real benefits on ground unless closely monitored. The government must make the ideological position of the nation clear: People first, economy next. This is the time to stop blindly following certain entrenched growth models and pro-actively pursue a model of growth that balances economy with holistic human development. Only a clear policy stance will inspire commensurate micro actions at the enterprise level which by the way is where the rubber meets the road.

Moving to firm-level actions: corporate chieftains all over the world have already realised the limitations of shareholder centricity. There is an increasing rallying of thought to move away from Milton Friedman’s doctrines and think of the business of business as more than business. At the onset of this crisis, actions taken by today’s corporate icons like Microsoft, Google, Tesla, Marriott hotels etc. are a testimony to the change of heart. No wonder, 181 CEOs of U.S. corporations decided to move away from the obsession with creating shareholder value and move towards caring for all stake holders (read: Business Roundtable’s new statement on the ‘purpose of the corporation’ (August 19, 2019).

In India, too, many corporate leaders and industry associations echoed this new humanistic credo. The Tata group committed to make full payment to daily wage earners. Many others followed. CII requested employers not to lay off employees and specially look after small businesses. All this sets a good tone.

However, a large part of India’s large human capital resides within MSMEs. There are close to 51 million MSMEs employing over 117 million people constituting a whopping 40% of our workforce. This work force is an essential lifeline of our economy. Unfortunately however, these medium and small businesses will struggle, not only from drying cash flows but also from limiting mindsets and lack of access to the rich repertoire of practices which their more experienced and established big brothers have. And these small businesses in the absence of belief and guidance are likely to be trigger happy and kill their golden goose: human capital

Therefore, it may be worthwhile to repeat, revisit and reinforce some very well known (yet little practised) tenets of nurturing human capital during and beyond this crisis, specially for the attention of small and medium businesses.

Here are 5 micro firm-level actions that will help MSMEs preserve human capital and their inherent energy in the interest of quick recovery. It’s important to note that human capital responds to many stimuli and not just money. While paying wages and providing health care will be basics, employees will understand and respond well if the overall approach is marked with empathy, care and concern. Hence MSMEs will do well to step up their understanding of the so-called soft skills in these times of crisis.

1.Communicate, communicate, and communicate: Most small companies’ chiefs avoid communication with employees, partly in fear of accountability and partly due to lack of skills. In times of crisis, you can never over-do communication. And communication is not a one-way pep talk. It’s more about listening, sharing and lending a shoulder. It’s also about transparently sharing the problems the company has and what is being done to counter them. It is about asking for ideas and seeking suggestions. Human Capital surprisingly thrives on communication and it doesn’t cost much.

2.Evolve a staged wage pay-out plan: Every company today must constitute a special task force to assess cashflows and liquidity daily and make forecasts under various scenarios. While determining the ‘fixed costs’ don’t forget the contract employees who have been your lifeline until this crisis. Dumping them now will breach the trust irreversibly. A staged plan softens the blow and conveys the empathy that is so important to demonstrate now. Some of the steps of the staged plan could be: (most companies can do these if there is will and skill).i) Pay salaries to the low-income employees to the extent it is affordable. ii) Ensure that those affected by Covid-19 are given paid leave and health care assistance. iii) Calibrate pay cuts carefully and transparently to demonstrate that the crisis is not being used to ‘short-change’ people. iv) At the end, if layoffs are inevitable, use furloughs first to the extent possible.

3.Engage employees in innovation and learning: Don’t waste this crisis. This is the time to rally people around innovation and creativity. Get them to think about opening new revenue streams using little or no capex. See how many auto companies are now producing ventilators, steel companies metal stretchers and clothes companies masks and almost everyone is trying hand sanitizers. All these are signs of agility, innovation and the much-needed resilience. Throw a challenge to employees: Ask them to earn part of their wages through new revenue streams. You will be surprised. This is also the time to step up on skilling, training and learning-specially by leveraging the vast online resources available now, sometimes for free.

4.Continue work from home: By now, you would have realized that work from home is not all that bad. It’s possible to get productive outcomes even as people avoid painful commuting and social loafing in the so-called workplaces. So please continue this next normal wherever possible.

5.Focus on physical and mental well-being of employees: Again, this does not cost much. But somehow small businesses dismiss these as big company luxuries. But all people in companies across all collars—white, blue, grey and gold—need care and nurture. All that it needs is to know your employees closely, offer a caring and empathetic conversation and building a trusting relationship.

These five steps will have a multiplier effect on our human capital. If done well and sincerely, we will see great returns on these rather inexpensive investments, over time. Who knows, perhaps a few million Minals are in waiting to unleash their potential and help India recover from the Coronavirus crisis. Will Indian State and India Inc. choose compassion over the much maligned ‘tooth and claw’ of capitalism? Will the firm-level micro actions reiterate the value of people? Will human capital be our top priority post the pandemic?

Chandrasekhar Sripada is professor of practice in OB & Strategic Human Capital at The Indian School of Business (ISB). The views expressed here are personal.