Sunday, September 26, 2010

Performance Reviews - The Third Sin - The Most Harmful of Corporate Practices

Come September, there is a sociological season change in my workplace. My buddy calls it the coming of the harvest months.

There is a purpose in the people, a spring in their steps … and if one follows them with time lapse photography or other devices of National Geographic film makers, one can detect a certain direction not only in their work, but also in their walk. This is the period when members of the client organisation is accosted with ingratiating smiles, eminently avoidable small talk and finally a prepared and mailed across feedback form that needs affirming stamp of approval.

These appreciation mails, earned through coax and cajole, with the most mundane of endeavours made out to be pioneering achievements, are virtually worn by the staff, in their newest gloss, repetitions, bulletins and forwards underlining emphasis, until these recommendations bear fruit in the form of a decent annual performance review, a fractional increase in the acceleration across the steep corporate ladder. Feats celebrated with relentless drinking  and happy hangovers – post harvest festivities according to my esteemed buddy.

Professor of the UCLA School of Management and the co-author of Get Rid of Performance Reviews, Samuel Culbert, argues that Performance Reviews contribute little positive and many negatives in an organisation. Among others, the axiomatic practice damages the relationship between bosses and their subordinates, keeps employees from speaking honestly about themselves and company practices, helps bad managers be bad managers and hinders good managers from being good managers, and ultimately hurts the bottom line. He also adds that there isn't a shred of evidence that anything good came out of this practice.

Whereas Professor Culbert’s arguments can be taken with the pinch of salt necessitated by the modern trend of management teachers in voicing the radical, there is a robust and, to me, irrefutable support from the celebrated quarters of Dr. Edward Deming who regards Performance Reviews as one of the Seven Deadly Sins of Management. In his epoch making book, Out of Crisis, Deming unequivocatingly states the downsides of the merit review process as he saw it. The idea of a merit rating is alluring. the sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good. The effect is exactly the opposite of what the words promise. In fact, he listed Performance Reviews as one of the seven deadly sins of management. However, like most of the other sins against which his astute mind warned, this practice is continued by corporations to this day.

Not mincing his words, Dr. Deming further added - The performance appraisal nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and politics… it leaves people bitter, crushed, bruised, battered, desolate, despondent, dejected, feeling inferior, some even depressed, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior. It is unfair, as it ascribes to the people in a group differences that may be caused totally by the system that they work in.

Among the studies which have largely agreed with his findings, in my mind, the most fascinating is the one which shows that the best predictor of the current year’s performance rating is – the last year’s rating.  This is mainly due to the couple of reasons – impressions created by employees during the initial period in the company generally continue throughout their tenure, and the trend of same companies to hand good ratings by rotation.

Culbert further adds - The performance review, a practice that is as destructive and fraudulent as it is ubiquitous. Despite all the evidence — despite the fact that almost every person reviewed and every person reviewing knows it is bogus — corporate bosses do nothing to hasten its demise. They won't even acknowledge they have a problem. Performance reviews, in which bosses look for weaknesses and pretend to speak objectively for the company, while subordinates grin and bear it, misapply the hierarchical structure that is necessary in any organization. They ensure that the relationship is about power and subordination, making candour all but impossible, and defensiveness the behaviour of choice for stressed employees.

The possibly robust derivative of this phenomenon – the three hundred and sixty degree appraisal in which an employee is appraised by his superiors, peers and subordinates – is something experimented with very gingerly by some select corporate organisations, preferring to perch on the comfortable fence and wait till it becomes one of the undeniable norms of the employer of choice.

Why do corporations continue with this trait? Why do leaders they say they want candour in the workplace, but refuse to change the most obvious impediment to such truth telling? And why do they uncritically accept the notion that there is but one truth — the manager's?

Culbert says that this can be attributed to intellectual laziness to bring in alternative solutions, the leadership ego, the reservation to being proved wrong in front of peers and subordinates and unwillingness to fix internal processes.  The looming performance review protects the manager from dealing with how subordinates really feel. It’s like an anaesthetic: The unhappiness and anger is still there, but the manager doesn’t have to feel a thing.

This view, according to me, is a bit harsh on the managers. There is indeed a definite degree of truth in the fact that managers like the authority, to use much utilised terms like attitude problem and insubordination to subdue a threatening junior. However, it can also be attributed to the fact that reward and recognition is so intricately woven into our social interactions, that we cannot contemplate work without review. It is not only the manager, but also the employee who is equally at a loss here to supply a change.

Well, Culbert does promote the performance preview method.
Deming offers his method of educated leadership, responsible hiring, training and education, lengthy constructive discussions and focusing on quality. There are also other ideas and opinions which suggest ways and means to implement processes les ridiculous.

However, in a culture where people continually focus on the next three months, organisations whose human resources themselves flow about in the constant waves of attrition, where the absolute management focus is on the bottom line, next quarter and valued clients, the recruitment strategy based on immediate hires to fit burning requirements promised to the client, the corporation an organism with psychopathic character traits, the sole guiding factor for which is the returns, who will be providing the necessary thought leadership to ensure a change of process that itself is a paradigm shift across the corporate world?

Sunday, September 12, 2010

Lean Liposuction Process, Survival of the Fattest, Heisenberg and Social Cybernetics

The instructor from England sat in front of me. We had been joined at the lunch table by two ladies, of different companies and nationalities, one British, one German, once pretty now etched across the face with experience, plenty of pet peeves.

The seminar on Lean Thinking was going full blast, and already several insights had been drawn into the application of the concepts in a non-manufacturing, so called 'knowledge' industry.

“I fully agree with what you have shared,” the British lady gushed, her plate more full of problems than the vegetation of age battling health salad. “Meetings, more meetings, where twenty people get into a room and one speaks for an hour, the rest drifting off to dreamland. That’s nineteen person hours down the drain.”

The German woman buzzed in, with the conviction in her voice making up for her heavy accent and lack of linguistic fluency.

“Twenty, for who listens? And all ze mails …”

The English lady picked up the thread like an expert weaver of reasoning. “Mails, and, well,the mailers. So many of them. Not only do you keep scanning the new ones and pressing shift delete, the mailbox runs out of space whenever you take a couple of days off. And soon you are clearing your mailbox for a good hour or two…”

“And attention flits … your sinking …zey are …”

“Yes, with mails and the ad hoc demands on our time … we want this with top priority by EOD. Heavens … drop everything and do this before getting back to what you were doing. We could boost our productivity by at least 200% if it was not necessary to re-gather thoughts every second minute because of changing management priorities and press releases…”

I decided that gobbling burger and french fries and was not ideal contribution to what was on paper a conversation – corporate trainings imply creating connections as well.

“A friend of mine – a psychiatrist – says that people in corporate jobs, especially in the Information Technology sector, are prone to Attention Deficit Hyperactive Disorder.”

My nugget of Dr. Roy’s wisdom was submerged in the tide of tirade against current corporate processes. “Even if everyone creates a rule to delete the mails that come from certain mailboxes, can you imagine the amount of effort it would take on the part of the employees to blah blah blah blah ….”

Once the number of blahs had reached the vicinity of the myriad, our instructor looked up from his soup for the first time and asked, “But, can you actually change the situation? Can you stop the mails, the ad hoc requests and meetings?”

English and German agreement has been historically hard to come by, but the two ladies nodded their synchronized heads  and started planning the change process.

“Yes, it can change if we  blah blah blah blah ....”
“It is ze finking zat needs blah blah zis zat blah blah zis zat”

French fries may be in drastic unhealthy contrast to health salad, but the crispy, oily, salty bites do take your mind off excessively motivated manifesto. I wondered whether the instructor diving deep into the bottom of his soup bowl was an equivalent evasive action. The ladies were in their late forties, so I was not too keen on indulging the visual senses either after shutting down my aural ones.

It was in the men’s room that he winked at me.
“Our dear ladies are very passionate.”

“If there is one thing I have learned in all my working years, it is never to expect much from my job.”

Perhaps politically incorrect, and hence, it strengthened the bonds of fellowship. The instructor winked at me again and raised his thumb.

“That’s what I call real experience.”

I laughed.
“Isn’t  that a bit unusual coming from an intense instructor of lean thinking?”

He looked at me with twinkling eyes.
“You think so? I would say your attitude of not expecting too much from your job is probably the best lean thinking I have witnessed, if you speak on a personal note.”

We came out into the lobby and he continued.
“If you try to change corporate organisations because you are struck by excellent ideas, and expect things to change for the better, what do you think usually happens?”

“I generally ended up fighting a lot of bureaucracy in my young and inexperienced days.”

“Exactly,” he laughed. “You will strive to change the whole process of working, fight losing battles with managers who have long back lost their ability to listen.  Can you fight the corporate demands of immediately preparing a presentation because the client has smiled at the account manager from the twenty fourth floor as he was entering the building? Will you ever get away saying that ad hoc requests are not lean because it clutters your thought?”

I spent a moment thinking about it.  He continued.   
“So the best thing to do is expect nothing more. You can’t change it. And by this method of Lean Personal Thinking, you save a lot of wasted personal energy, emotions and time in trying to change the machinery.”

“Tell me P***,” I said, “Do you see the same sort of useless effort and inefficiency in every company?”

He nodded and looked surreptitiously to each side.
“Every company can increase its efficiency by at least 100% and reduce costs incredibly ...  but that is not to be.”

“Why not?”

He smiled and took his seat in the lounge, in no apparent hurry to get the post lunch session started.
“What is a corporate organisation? It is not a cutting edge research centre where only the best  can get the required job done. A corporate organisation is nothing but a networked organism in the animal kingdom of society ...”

“That’s new ...”

“Not really. Have you heard of Cybernetics?”

“Isn’t it a subject which deals with machine response ...?”

“More than that. It was developed to study machine behaviour, but it is a cross discipline study of the behaviour of any dynamic system, be it machine or organism. There is a very complicated book by Stafford Beer which talks about the Cybernetics of a Firm. In that the organisation is treated as an organism ...”

“The author’s last name sounds ominous.”

He laughed.
“Okay, I will give that to you. But in effect, corporations are the source of livelihood for a great number of people. In the field of socio-cybernetics, it is governed by a theory of the survival of the fattest."

I almost threw half my coffee down my trachea.
“What was that?”

“Not too surprising, my friend. Whereas survival of the fittest is definitely true for evolution, for survival of a species it also has to have a degree of fat. Look at the human body. Even considering all the modern day fitness fanatics, a minimum percentage of body fat is essential”

“And where does the corporation come into the picture?”

“If the corporation is viewed as a creature, then believe me, this animal needs a lot of fat to survive. Else, with lean liposuction, it will be drained into an elitist work environment, something it was not meant to be. A thousand employees mean a lot of mediocrity, and this mediocrity has to survive – and climb the corporate ladder as well. And in this survival of the fattest, lean and efficiency does not really enter the picture. Inefficiency is essential. Else almost  always efficiency can be increased threefold while decreasing man power by fifty percent ...”

I wondered about this for a while as the corporate executives walked about in their smart suits.

“Are you serious?”

“Never been more. If you want me to see me as a comedian, you have to follow me into the class. You think you won’t get mailers about the great week ahead and what the dumbass CEO said in the latest issue of Financial Times? All because of this lean fad? How will the great communication wokforce of the company make its living? Half of that team will have to leave. Makes sense?”

“Make that 88% of the team. Yes it does.”

He sighed.
“I will give you a very painful, if not absolutely relevant example, the mention of which tugs at the strings of my heart. But, you, a Dutchman, won’t really feel my sorrow. You know what Ashes is?”

“Of course ... I don’t smoke myself, but ...”

“Forget it ... I am English, from Sheffield. A cricket buff. Ashes is the name given to the traditional England versus Australia test match rubber. Ah, in Amsterdam rubber has a different connotation. However, let me say that whoever wins the series is said to win the Ashes. The countries have been playing each other for over a hundred and thirty years ...”

I was interested. “A Malcolm Gladwell sort of example, is it?”

“Overall, except a few years in the fifties, using questionable methods in a thirties series and against a couple of weak Australian teams in the seventies and eighties, it has been the land down under who has generally been on top. They have won more than a hundred and thirty tests against us, while we are still struggling  to reach a hundred. And guess what ... in spite of playing more or less the same number of test matches over the same period of time, the efficient Australians have capped just over four hundred players. While we English have had six hundred and fifty.”

“So, efficiency means fewer hands ...”

“Yes, and hence, less employment. Cricket is a highly specialised sport. Think of any corporate job. most people can do it, with an apology of training."

“Come on generous.”

“Including teaching Lean processes, let me add. So, in the corporate world, the numbers are yet more skewed in favour of inefficiency. And think of the number of hands it is necessary to cut off if efficiency rules. Society cannot afford that. An organisation is a complex creature with fierce survival instinct. At every  level, it rebels against efficiency. There is a sort of Heisenberg principle in the corporate world ...”

“Heisenberg? Uncertainty?”

“Not uncertainty of measurement, but of improvement ... Efficiency of an organisation cannot be improved without modifying its size. Hence, given a constantly great number of people, we cannot have efficiency. Ironically, in such organisations, growth is equated in terms of the number of people employed. And the unpleasant truth is that people now touted as management gurus, who claim decisions taken straight from the gut, now speak of management strategies, six sigma, lean processes as their roadmaps to brilliance - all of them have used rationalising to power their career.”

“Everyone rationalised?”

“The ones who did not tilted the balance in their way by manipulating other factors ... it is the survival or the social organism in question ... so if fat is not cut out, it needs to be compensated by discharge of undesired substances ...”

“I guess you are mixing up metaphors.”

“I guess in that case you know what I mean. is a good reference site.”

The two ladies poked their synchronised heads out of the classroom door. My new friend signalled that he would be on his way.

“I will revert back to my tutor mode and become a champion of lean thinking. However remember what I told you, and don’t try to do too much about it. Remember, think lean for yourself.”

“Cool. Thanks a lot, P***.”

“If I had said all this to the ladies, they might have tried to reform the whole system ... with protest marches and demonstrations against corporations. I am not here to teach all that. I love lean thinking. But, you already have insight into the corporate world, as you proved with your observation in the toilet. It is rare knowledge that I have shared with you ... share it with prudence.”

“Ouch,” I said. “I was wondering whether to blog it. Share it with the world.”

He laughed. “Only if you don’t mention my name. You can blog. That is actually sharing knowledge prudently and in a lean manner. Do it once, and only the seekers will find it. The rest will either not read it or find it too bitter for their convictions to digest. So post by all means.”
We walked into the class again and within minutes I was jotting down my thoughts. Lean Personal Process, Survival of the Fattest, Social Cybernetics, Corporate Heisenberg Principle ... this was one training session I would not forget.

Thursday, September 9, 2010

Is Management (MBA) a profession?

Is Management really a profession?

The perplexing question raises its haunting head again, this time out of the necessity of difficult decision making.

As I swing merrily with the rest of the crowd in the colourful ring of corporate circus, I periodically tumble against pestilence under the guise of Knowledge Champions. To carry aloft the fake torch of the so called knowledge industry I am often cajoled, coaxed, commanded and cautioned into pursuing corporate certifications.

My occidental outer shell, along with the semi Dutch genes, thankfully make it abundantly clear to my Indian managers, monitors and mentors that I don’t consider the certifications to be worth the paper they are written on.  And that is why, after several unsuccessful attempts, they have hit upon the unified idea of convincing me that the best alternative career path is to get an MBA. According to my seniors, this is what stands between me and exponential growth up the corporate ladder.

However, in spite of these domineering decrees, I cease to be convinced. May be once more my Dutch ancestry peeps through my American shell with obstinacy. The reason I don’t want to devote my time, more profitably spent curling up with a good book or going to concerts and shows, is that somehow I hardly ever end up thinking of MBA as a profession of any importance.

And I am not alone. Recently in an article in the Harvard Business Review, Richard Barker argues that there are not enough reasons to bestow the title of a profession on the MBA as one can on doctors, engineers and lawyers.

I agree, Will someone in his senses ask anyone but a specialist brain surgeon to operate on his cranial tumour? Can we expect an unqualified architect to design a skyscraper? The lawyers are often brunt of cruel jokes, but one such quip points out that he is the one who knows exactly which page of the fat law books the relevant answer lies and therefore is indispensible in a critical civil, corporate or criminal cases.

However, analogously,  is it absolutely necessary that any vital business venture will need to be managed by an MBA?

In my experience, the MBA is largely expendable. Often in such cases, decision makers – the wise ones – will stick to people with experience in the domain. And most often, the decision bears fruit.

As a reason for this, Barker points out the evident lack of technical expertise required for the job of a manager. It is his job to mainly integrate the contribution of the specialists – be they lawyers who draw up the contract, the skilled workers who do the actual work or the quality professionals who ensure the correctness of the deliveries. And it is a tough ask to put these integration skills into a body of knowledge and maintain a strict threshold of competence to allow entry into the profession.

It is also difficult to ensure responsibility to the society that professions such as that of the doctor, engineer and lawyer are actually entrusted with. Code of Ethics of Business in  this regard  is a jargonified oxymoron to say the least.

The other distinction a lawyer, doctor, engineer or a martial arts master has over an MBA is that the expert knowledge is difficult to muster even if explained in layman’s terms – something that does not really apply to the trained manager.

On the other hand, the preference for domain experience at the expense of the MBA is well founded. As Malcolm Gladwell explains in his Outliers, expertise leading to success depends on a huge amount of hours spent on the same task. Be it musicians or computer programmers or sports personalities, it is first the opportunity for spending the number of hours, appended with the same number of hours well spent in the activity, which together amount to brilliance. For a professional who has spent a long, long time on the floor in the domain, working with the clients and customers of his field, has a much better chance of succeeding than an MBA whose experience is fed through text book curriculum and theory. Anyway, I find myself wondering how much authentic value the MBA curricula actually have – if prepared by the stalwarts of the profession which produces a lot of glitzy presentations signifying nothing.

A very glittering argument against the trained MBA is played out right in front of my eyes in the way the Indian companies manage business in the Netherlands.

With the focus on cost cutting, many Indian companies which are supposedly growing at break-neck speed revert to relatively young MBAs to expand their accounts in Europe. After careful scrutiny, I find these companies soon coming off second best, their focus shifting to the greener pastures of the United States with European market relegated to a nice to have, following the dubious principles of sour grapes.

Why? There are companies where grey haired experienced veterans, who have climbed up the ladder of the industry from the grass-root to the highest echelons, are asked to carry the expansion in Europe. These are the older firms that stay somewhat ahead in the game. The silver hair bring maturity and exposure, with the firms willing to pay the exorbitant cost of the education of the kids of these managers, most of them well established in the family way. The years of working with the Europeans have led them to understand the Dutch way of operations and they know what works and what does not in this consensus culture where there is no low hanging fruit.

The other group of companies, mostly newer ones touted as fast growing, tend to minimise their cost by refusing to look at the essential expenditures such as the education of children. So, the managers who have toiled their way up the corporate ladder are unwilling to continue their operations here for long, preferring to go back home or to eliminate the cost of International schooling by moving to English speaking countries like UK, USA or Australia. The companies try to tide over the problem by bringing in supposedly expert managers who are young enough to be unmarried or without children – namely MBAs from reputed institutes.

Without field experience, with the knowledge of collaborative work in classes full of either Indian or American students, these MBAs now try to manage operations through a combination of text book knowledge and rowdy arrogance. I have seen quite puerile strategies from this tribe of men, whose years have not yet blessed them with the patience needed to build businesses in Europe. They go about trying to implement the Walmart model of cheap labour, or the Starbucks model of proliferation ...or just wait for business to come to them through swanky powerpoint presentations that make a hit in the Manhattan.  Sorry, the Dutch are different, and so are the Swiss, the Belgians, the Germans, the French, the Swedes and all the other European countries.

There is also an arrogance that keeps them from knowing the culture and language. A couple of slides showing clogs and cheese and windmills is not an exposure adequate enough to enable carrying out fruitful business. And while the hookers of the red light district, who come in from Sarajevo and Turkey and Thailand, pick up Dutch in a few days to carry out business transactions, I have never seen a foreign MBA even making the necessary effort in the years that they stay here. So much for a knowledge industry.

The more I see them, the more it is apparent to me that the profession has miles to go to qualify as one. Barker in his article suggests some remedies, but I think those are just a start. To gain the trust of the public, to be in the same regard as the 'good doctor', is a journey that has not yet begun and I am not sure will even start off.

So, I continue to spend my time blogging, reading or enjoying myself instead of putting myself through the rigours of a business administration course. The net results may be negative, but then I would rather like meaningful time for myself amounting to nothing in euros rather than meaningless degrees which can bring home a lot of dough. To each his own.

Saturday, September 4, 2010

Predicting Perils

There are pundits aplenty who, in retrospect, fill pages of the finance columns of newspapers and magazines to describe how the crisis came about. And they take it to the logical conclusion of formulating step by step instructions to make the future of the world economy robust and immune to similar capitulation.

All this leads me to wonder why none of these wise men, a lot of them drawing sinful salaries and with numerous awards and recognitions under their bursting belts, managed to predict the coming of the slump. A renegade Nicholas Taleb perhaps, and that too will be strongly contested by economists hungry for the spotlight. They have their models, their sacrosanct predictors. It is sacrilege for others to be correct and prove them wrong.

Sceptical though I remain of Dr. Suprakash Roy’s explanation of the crisis as a result of the inhibition-less internet, it does raise several questions in my mind. Have we overused technology to our own destruction? Much in the way people had predicted that the world will degenerate into a mushroom cloud resulting from advances in nuclear physics. We came close, but the extinction of the human race was once avoided by the presence of mind of one of the most unsung heroes of humanity, a seldom remembered Soviet general whose name I will Google up later.

Perhaps we have avoided the nuclear disaster with the fall of the Soviet Union, which leaves the United States with little excuse to press the panic button. There remains the threat of Chernobyl like accidents in US, UK, India, Pakistan, Israel, North Korea and all the other countries who are the proud owners of weapons of mass destruction. But, in an inconspicuous way, the innocuous technology of fibre optic cables and hyper text transfer protocol may have reformatted the spherical world into a flat one and may have been ignorantly and irresponsibly responsible in accelerating one of the biggest non-violent disasters in history.

To return to the question of the failure of predictors, I wonder if I have managed to obtain a humble insight into it. And at the risk of being branded pop-economist or pretentious, let me forward the theory in the comforting solitude of my blog.

A couple of days back, a senior person of our company had come popping into my cubicle and indulging in an impassioned and incensed tirade against my buddy. I have related feeling not a little strange about the entire episode. In the corridors of the company, the relationship between the two is rumoured to be hand in glove – a situation not very favourable in the insecure eyes of some senior people and also the reasonably insignificant point of view of a few grumpy ones.

All these lead me to believe that for whatever cryptic reason, the manager has developed a temporary pointy edge in the soft corner reserved for my buddy.
I guess you must be wondering what this relational dynamics have with respect to the financial world. The lateral approach to the way of looking at things, introduced by my buddy, and taken to a transcendental (please, please notice the pun on trance) with the session in the Magic Pot, has helped me to draw a curious solution.

Could any economic model predict this change of relationship? I hear some of you scoffing at me and pointing out that it is not the job of economic models or financial analysts to work out sentiments of complicated individuals.

But, on second thoughts, is this absolutely true?
When light shines through an aperture in a physics experiment, there is no emotional conflict between the photons, and that makes the result predictable. However, with two tiny apertures, we get an interference pattern due to the uncertainty in the world at the level of quantum physics. All this confusion and a proprietary uncertainty principle exist in the physical world even without the involvement of emotions.

What about the economic or business world? It is a world predominantly governed by human beings, who are not projected photons of light through apertures, but a complicated conglomerate of emotions, sentiments, values and thought. Is it possible to predict the complicated turbulences caused by interpersonal or intrapersonal relationship with any degree of accuracy?

Let us deviate a while and consider a game between Mets and Yankees. The detailed records of all the Murphys, Wrights, Castillos and the Jeters, Swishers and Canos are documented with precision in numerous sports databases and can be found in the pockets of any self respecting junior school collector of baseball cards. However, with all these facts and figures at our fingertips, can we predict the result of the match with any degree of certainty? With the help of the formbook, maybe we can make a decent effort, but when it comes to the individual performances, we cannot even dream of approaching certainty.

What if Sabathia pulls a muscle and can’t pitch? Can a predictor based on the statistics database foretell it?
Similarly, in the more heated battlefield of business, can we predict whether a sudden terrorist attack on the Empire State Building will make speculators behave erratically? Can we say for certain whether the best financial adviser of a Dutch bank will suddenly decide to spend the rest of his days locked up in a monastery in Bhutan after coming close to choking on his liquorice stroopwaffels?  What if the CEO of the same bank, after a satisfying spree in de Wallen, decides to go against the board of advisors and sell off a section to Rabo?

When it comes to people, it is very difficult to predict. And therein lie the problems of prediction where we compute the trends, drifts and direction of numbers and charts without accounting for people. We have on our hands a human race that is being exposed to a new plaything every day, with e-commerce, Swift, identifier, secure socket layer and the orkut, facebook, twitter, linked in, blogs ... I guess I have ultimately identified with the good doctor after all.

Friday, September 3, 2010

Babel Tower of Markets

I have often provided in these blogs essays on the market, the financial situation, the soul of corporations and such meaningful mundane matters (my buddy-sifu will appreciate the alliteration). However, in his half philosophical sessions, my buddy takes it to a level that flickers in the fuzzy boundaries of enlightenment and mockery. Inspired thus by this electric mate, I will try to crystallise some of my recent reminisces into these unrestrained pages.
If I am to view the recent financial collapse in the analytical light, let me offer some statistics. In 2007, Lloyd Blankfein, the Chief Executive Officer of Goldman Sachs got a whopping salary of $73.7 million. Richard S. Fuld at Lehman Brothers earned $71.9 million. Compare this to the average American salary of $34,000 per annum paid the same year. These earnings were nothing compared to the gross earnings of Angelo Mozilo of Countrywide Financials who earned $102.8 million. And all these high and mighty figures pale to insignificance when we find that the new prophet of modern economy, a guy named George Soros, lapped up $2.9 billion. And meanwhile, nearly a billion people worldwide struggled to get by on a dollar a day.
The lopsided economy is set in perspective when one pauses to consider that the net revenues of Goldman Sachs during that year was over $46 billion, exceeding the GDP of more than a hundred countries, some of whom, like Slovenia, are now in the EU. Isn’t a financial situation this unbalanced, bound to topple?
In the illustrious footsteps of my new friend, I have also thought of a parallel, which – because of my protestant background – does reach religious realms, if not the philosophical peaks of the Gita.
The Bible tells us the story of the Tower of Babel. When humans, for personal glory, reached for the skies, to build a massive tower which would traverse the heavens, God came down and confused them with multiple languages. They could no longer understand each other.
Can we map similar parallels in the human quest for wealth? The speculators and Wall Street CEOs earning massive stacks of lucre, trespassing the natural boundaries of balance and harmony. And this endless pile up of riches has ended with the crash of economy, that has brought in its wake, confusion galore. As masses are struggling to understand the different economic jargon they had blissfully ignored and trusted in the heydays of the boom, the financial language is indeed proving to be a discovered obstacle for many who cannot even make out how interest builds on their credit card loans. And the monolithic financial institutions that had towered over the financial world with their mergers and linked economic models are fast retreating to the old banking ways – back to basics.
When I asked my buddy what he thought of the writing (the part I have provided above) he had his own insights.
“I would have added that the financial systems got complicated as they started being built one on top of the other with mergers and acquisitions. This led to a point where the banks were huge organisations that rolled with financial power without anyone understanding the whole – systems and sub-systems that were – Hebrew to everyone to keep with the Biblical theme. This is when people stopped understanding each other. Everything became chaotic and in walked the Indians, celebrated survivors of chaos and masters of the vocation of being middle men.”
New angles of looking at the Indian story indeed.

The Indian Infiltration

A lot of the readers of my blog have asked me for an insider’s view into the changing world. For the ones not aware of this request, it can be surmised as an analysis of why and how the Indians are taking over the world by someone who works with these guys.
There a lot of Indian haters and baiters in the Western world. That is understandable given the way a strange culture has gradually crept in and infiltrated into most of the corporate systems, steadily chipping away at the employed mass of local population. They crop up everywhere across the length and breadth of the hierarchy – from the corporate boardrooms of fortune five hundred companies to the helpdesks who answer my call from Bangalore when my Windows suffers routine crashes.
It is strange, really. I have worked with several people in the PMO of the Operations and IT wing of the Bank and have not yet come across exceptional talent. But then, who needs talent for running a Project Management Office? The question is, why go to the Indians? Is it only cheap labour? Or is there something more?
I won’t really go into the nitty-gritty of the complicated topic, Thomas Friedman explains it adequately in The World is Flat. A million other blogs speak of it. I will try to construct some deductions based on my daily journey from Utrecht to Amsterdam Zuid and back.
The Inter City, crowded with the daily office going passengers, is a defining snapshot of the Indian infiltration. More than half of the professionals on their way to the daily grind are Indians. Headphones plugged to their ears as they converse with colleagues and family at home, with surprisingly equal distribution, or as they tap their feet imperceptibly to Bollywood music – their gadgets are more yuppie than the normal Dutch guy. iPhones and Blackberries seem like fancy toys that a nation deprived of a privileged childhood has suddenly discovered in late youth. Much of their conversations are centred around electronic wonders, the features and the value adds.
I am able to follow most of the dialogue, since a large percentage of them take place in English. Strange it may see, but as Madhu Deb explained to me during another three hour conversation, there are nearly twenty major languages in India and innumerable dialects and English is the common denominator of the urban classes. Sometimes the odd dialogue does take place in other languages, but then too it sounds familiar, being liberally sprinkled with corporate jargon. If two Indians sit near you and bits of the tête-à-tête drift into your ears, it is often difficult to make out whether it is a casual conversation or an interview. They talk shop like people possessed and that underlines the hypothesis in one of my earlier blogs that there is little line of demarcation between their business and personal lives.
I hardly see anyone with a book, and if I do, more often than not, it is either a technical manual or a guide for making quick bucks. The other topics that I sometimes find them discussing are mutual funds, cricket and weekend plans, the last of which boil down to supermarkets, Indian shops and Bollywood movies.
It is perhaps dangerous to draw conclusions with my limited knowledge, but my train journey does point out several factors regarding the Indian infiltration – I resist calling it domination.
English language is definitely a very important facet and the years of suffered exploitation as a British colony is now paying off in major proportions. That people from different parts of the country choose to converse with each other in English is something unique in the non-English speaking world.
The other facet is this absolute lack of distinction between work and life. Whereas a common Dutch person stops thinking about work after his weekly thirty six hours, and a non-workaholic American employee does so after four more, for these people work is their life. While one would find a Dutch employee arriving and leaving office almost in the same timebound meticulousness as the GVB Transport Service, the Indians are flexible to stretch office time into a canopy over their lives. And to some extent it is understandable. Maslow all the way.
This being the major differentiator, the work force of the average Indian thrive by putting in their readiness, availability and this round the clock commitment to work to their advantage. Maybe out of Darwinian adaptation, the dimensions of hobby, passion and entertainment have been limited to less time consuming gadgets, Bollywood and shopping malls whereas the endeavours demanding time like outdoor sports, enchantment with Literature and gardening are left to the temporarily more secure Western population. The grand scheme is probably to work on the ulterior motive of the evil corporation to get as much work out of the employees as cheaply as possible, and thus usurp the livelihood of the unsuspecting children of affluent nations who have been brought up to believe that the concept of work life balance is axiomatic.
I read that India is a country of extremes – the mysterious land full of diversity in the spheres of geography, economics, social conventions as well as individuals. That too is apparent from my co-passengers, who range from the well oiled hair with the smear of sandalwood on the forehead to the spiked shock and chic standalone beards.
Similarly, there are extremes in terms of outlook and culture as well.
I was reflecting on these when my cell phone rang three times and stopped. A protocol established between me and my buddy. It was an SOS, and as the system demanded, I picked up my phone and gave him a call. I could hear his phone ringing a few cubicles away and soon he came into my view, carrying on an animated discussion with himself.
“Thanks mate,” he said on joining me. “The kid has just returned from a field trip and you better be on your guard. Have you accrued some leave? I think this is the best time to go on a vacation.” (This will make sense to members of my mailing list.)
I wondered whether I should speak to him about my reflections on the Indian infiltration of the world. He is Indian after all, and if I deviated from the razor’s edge of political correctness, one could not rule out the chance of coming across as offensive. The current day white man’s burden comprises of history of assumed superiority that one now has to play down with an overdose of acceptance and humility.
However, once I had decided in favour of him of his opinion, he threw some characteristically unorthodox light on the discussion.
“You take a look at the bank around you. It is a complicated organisation. It started as a small venture a century back and grew and grew. And soon things got complicated. In most of the big giant corporations across the world, little deltas of change have added up to assume mammoth proportions. Systems have got complicated. Organisations and industries have become too complex for management.”
I agreed. The banks had grown and the systems had become more and more complicated with added services, requirements, changes in business. Hardly anyone had the full picture of any product or line of business.
“It is chaotic. The magic that the Indian brings into the equation is the ability to function in a chaotic world. The institutions back home grooms one for it. The government offices, the traffic, the education system, the hospitals, the parliament – everything is in a strange chaotic equilibrium. People who have been through the experiences back home have been baptised by fire.”
As I considered this profound thought, I asked him whether the knowledge of English played a part as well.
He became even more reflective.
“You know we had been colonised for over two hundred years. That works in multiple ways now for our benefit,” he smiled. I am never able to decipher between seriousness and mockery of this peculiar guy outside the tai chi class. “Colonisation helped us learn English. And along with it, it left a peculiar relationship dynamics with the white man. Most of the Indians are gratified when a white guy from any level of the hierarchy accepts him in his fold. And this is something that has led to levels of motivation that is impossible for a normal workforce to achieve. And it does not stop with the white boss, it peters down to any supervisor. However, at the same time, there is a pent up desire to topple the white – and by induction any – supervisor from the position of power. This can be linked to strategic motivation. It’s not uncommon to find both ends of the spectrum in one psyche.”
I was more than a little confused.
“But, Pritam, these are two opposite things ...”
He smiled one of those maddening smiles of his which pave the way for cryptic wisdom.
“As a learned man preaches, everything comes with its in built opposite.”

Is Crisis an Industry?

In the curious consciousness of the business world, this would be a profound thought. Somehow, this relentless quest for making more and more money, which has, in my opinion, landed us in this financial soup, has been reformatted by the corporations into something along the lines of eternal strife for knowledge, truth and God.

This is nothing new. Modern day business barons have somehow managed to embed the illusion of a soul into their ruthless ventures. A pretty ancient principle called the Brand has reached ridiculous proportions today. Products, which ultimately anyone can manufacture, has taken the back seat, and the brand has become far more important. The value, the conscience of the corporate identity, that extra component which can only be termed spiritual.

For example, the Nike president Tom Clark, who also doubled up as the sneaker shaman, spoke of keeping the magic of sports alive – the inspiration of sports allowing us to be reborn constantly. It was much more than selling shoes.

In this setting of corporate transcendence, it is quite natural for the facade of interpretations of the financial crisis to include pseudo metaphysical diversions. The rampant reactions of the so called pundits of the markets – none of whom foresaw this slump – range from intelligent afterthoughts to philosophical ponderings. A huge cult seems to have grown out of the worship of the Money God, and like any other civilization, they seem to be developing their own religion, philosophy, rules and value system. Or is it value laundering, the washing of the dirty soul corrupted by the pursuit of material wealth?
Simon van der Wiel is a fictitious character who appears in the novel The Best Seller by Arunabha Sengupta.

These lines are both collected from the novel and extrapolated from it - additional musings of the author through his alter ego

About Simon

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Amsterdam, Netherlands