Decoding the Indian Middle Class - Random Thoughts

This is the first article in a series of views and expression that I wish to share on Consumerism in India…..

DOMESTIC CONSUMPTION – WHY ARE WE DIFFERENT

 A lot has been said and written about the great Indian middle class and the opportunities that they offer to the consumer sector – what I am going to write in the next few paragraphs is my take on the domestic consumption story – the perception around which estimates are prepared, the analyst take on the middle class, the expected consumption levels, etc.,

 

a.       The mystery around the growth projections that we believe would be generated by this class

This is the larger point – across sectors and sub sectors as you dissect the building blocks of growth you will find that analyst and planners have re-calibrated the numbers with the changing dynamics.  Why do we project with a lot of optimism than be realistic while estimating them?  I have had the opportunity of working with some of the best minds in the corporate world – as a subordinate, peer and supervisor. Many of them lead and impact businesses in India and aboard  and I am sure the optimism still continues to remain as they look at Great Indian market place.

We continue to believe or claim to believe that there is indeed a prosperous middle class in India with deep pockets ready and willing to spend on everything that is on offer in the market place – whether it is eating out, buying branded stuff, spending on fast moving consumer products, splurging on personal care and hygiene products and services, investing in assets, ability to pay at private health care service providers and the list is endless. This belief transcends into numbers given the absolute might of the middle class and the growing perception that infrastructure development would lead to increased urbanisation. How many times have planners and analyst taken a pause and revisited their estimates and projections against actual numbers and figured out what went wrong when the economy was perfect and growing at around 8%+

b.       The organised sector vs the unorganised sector

India is a perfect example of a parallel economy for just about everything – and here perhaps the planners and analysts have accurately predicted that the parallel market is atleast 4-5 times larger than the organised market.

How do we go about defining the unorganised market – it could either me  cheaper substitute or unbranded product or service, traditional product or service, pirated stuff from other countries, duplicate product passed off as genuine branded product,

We are all living with the hope that the organised market would slowly eat into the share of the unorganised market – and why would this happen? The theories floated are ability to spend more, brand and quality consciousness, awareness and…,

Do we think that the market forces controlling the unorganised trade will let their trade die ? Would they not take steps to build their business – play the pricing game, distribute better, bring in better value for money, use improved  technology to ape products, - certainly they would do all and more.

The belief that the organised market would grow ahead of the unorganised trade and capture their market seems slightly off the mark. The unorganised trade has been set up, built and consolidated on a platform over the years in India and to believe that their trade will give way to the organised trade is farfetched. Yes, there could be challenges from the organised market, but there would still remain a significant section of the Indian consumer seeking comfort from the unorganised trade  

I may sound a wee bit pessimist and an outlier and my comments might not be entirely based on any scientific analysis or trends. But, I am basing my thoughts on a few things:

a.       What I have seen and worked in the market place – as a consumer and an observer

b.      Heard people of repute  talk and visualise the future

c.       Read books on consumer behaviour and insights

d.      News reports

e.      Prosperity within the middle class led by spending power, urbanisation, globalisation

f.        The manner our economy has performed over the last 2 decades

I would love to write sector and industry specific trends and thoughts in my subsequent blogs – and as I mentioned I may not be entirely right in my understanding of the sectors, but certainly would like to know the views and perspective that others might have.

 

As I sign off, I need to bring in this disclaimer ----------I work in a private equity firm and my job is to extract WISE knowledge from first generation entrepreneurs about their businesses and figure out more about their future plans and their ever optimism belief around the India growth story – their optimism certainly gives people and professionals like me the much needed adrenaline kick to believe  …….WOW there are indeed Dreams that can be converted to reality someday…..

PRIVATE EQUITY – WHAT IS THIS ALL ABOUT ?

This article appeared in the Student New-letter published by the Institute of Chartered Accountants of India in their July 2013 issue - the link is given below
http://220.227.161.86/30232stjournal-july2013.pdf



A typical investor’s portfolio could be classified under a number of different asset classes, depending upon the investor’s risk appetite.

 

A TYPICAL INVESTOR PORTFOLIO

Cash, fixed income, equities, are some of the traditional and known forms of investment options that the investor exercises. The Alternative asset class is a relatively newer form of diversifying the investor’s portfolio and has gained acceptance and prominence in the recent past. Alternative asset class includes investing in real estate, hedging and private equity. We shall discuss and understand a little more about private equity in the accompanying paragraphs.

PRIVATE EQUITY FUNDS generally make high risk, potentially high return, privately negotiated investments including investment in and as growth capital, venture capital, leveraged buyouts, distressed debt instruments and mezzanine instruments. Investors in a private equity fund include company pension plans, trusts, banks, insurance companies, family offices, high net worth individuals, various classes of offshore investors - and all of them allocate a portion of their assets towards this asset class. This class of investors are generally able to allocate a portion of their assets towards private equity –

a.       Because of their ability to take risks or higher exposure than normal

b.      Look at a long term horizon ( private equity funds normally are close ended and could return investment over 6 to 10 years) 

Evolution of Private Equity

Private Equity was predominantly an American phenomenon and was prevalent since the dawn of the industrial revolution – wealthy individual financing and advising industries that they believed had an attractive market. However, the industry gained momentum post the Great Depression of 1930s, when the existing ways of financing fast growing and start ups companies through bank funding was considered inadequate and webbed with complicated paper work and regulations. Laws like the Small Business Investment Company (SBIC) came into being in the 60s to moderate the flow of capital to small and medium scale industries.  Through the decades leading to the 21^st century, private equity investments moved from the traditional venture capital funding to buyouts and distressed assets purchase. The industry attained some form of maturity and the concept of limited partnership gained credence.

In India however, this industry gained its roots in the late 90s and over the last 15 years, the industry has seen its share of ups and downs. Over $ 56 bn have been invested across 2500+ deals in India since inception across sectors. The private equity industry is regulated by the Securities and Exchange Board of India (SEBI) and recently SEBI had introduced the Alternative Investment Fund (AIF) Regulations 2012 to streamline the working of this industry.

From the diagram below, let us briefly understand how the private equity cycles work and who the players.

The Private Equity Cycle

 

 

Limited Partners (LPs) and General Partners (GPs)

The limited partnership structure is the most preferred form of link between the suppliers of capital (Limited Partners) with the individuals who make and manage the investments (General Partners). This structure ensures that the LPs liability is limited to the extent of the invested amount. The GPs on the other hand are solely responsible for sourcing deals, executing the deals and managing the portfolio companies. The LPs investment is pooled in a common entity, which could be limited liability corporation, managed and operated by the GPs.

Various kinds of LPs exist in the market place and they are predominantly institutional investors like pension houses, bank and insurance companies, trusts and foundations, wealth funds, angel investors and high net worth individuals. To de-risk their overall asset allocation, LPs look at private equity as another asset class and therefore invest a portion of their wealth.

GPs on the other hand are a breed of well informed, networked and resourceful set of professionals with an uncanny ability to identify, track and invest in companies looking for capital.

The LPs investment as mentioned above is pooled in a common entity controlled by the GPs – the entity is formed for the specific purpose of investing the LPs investment in portfolio companies (the Investment Process as detailed below). The time horizon of the investment and the eventual exit is between six to ten years. The GPs are remunerated through recurring yearly fees from the common entity. At the time of the exit of the investment, the gains from the investments along with the capital amount invested by the LPs are transferred to them. The GPs are normally allowed to retain ~ 20% of the gains as their reward for their services.

The Art of Fund Raising

Once the LPs have made up their minds to look at investing in private equity, they source and screen for potential GPs. LPs investing appetite could be specific in their interest levels – they might be sector specific or geography specific. Some of the criteria that the LPs normally would employ include: 

-          GPs skill sets, expertise, background, past performance and team

-          The fund macro factors including past performance, competition with other funds, fund strategy in relation to the economic environment

-          The investment criteria of a LP – within the current portfolio, tenor of the fund, expected returns

-          Strategy and approach of the of the GPs – differentiated, sourcing opportunities

The LPs would then conduct a “fund due diligence” to evaluate the GPs. The diligence would cover the GPs track record specifically past performance, ability to invest and manage portfolio companies, team and soft skills, their comparison with other similar funds. Based on the results of some of these criteria, the LPs would weigh their decision with their investment criteria and decide on their investing plans.

Various kinds of private equity funds exists – each fund is unique in its approach and is managed by capable GPs. Some of the familiar types in the market include

-          Venture Capital and start up

-          Buyout

-          Growth capital

-          Distress debt funds

-          Mezzanine

-          Real estate

-          Sector specific

The Investment Process

Once the LPs and GPs have reaching an understanding and a fund is in place, the next step involves the investing process. Investing process is normally the domain of the GPs, however, in certain cases, key or anchor LPs do have the authority to decide on a particular investment.

The steps in an investment process include

-          Deal sourcing, identification

Deals are normally sourced through third parties like investment bankers, advisors, commercial banks and service providers. GPs also indulge in proprietary deals or proactive deal sourcing through industry networks, research reports, corporate database and friends and family.

-          Deal evaluation

Once a deal is identified and there is mutual interest in pursuing a discussion, the GP’s team would then engage in understanding the business, market dynamics, internal and external factors impacting the business, competition, financial information, promoter background and experience, regulations and a host of other factors influencing the business.

-          Valuation

After analysing and studying the business model and the comparative data of the business, the GPs would be in a position to discuss valuation of the business with the company. There are a number of valuation methods that are used by the GPs to determine the accurate value of the business. Some of the methods include

o   The comparable method

o   The simplified valuation method

o   The net present value method

o   Adjusted net present value method

However the most commonly used method is the comparable method – wherein data based on similar companies are reviewed and appropriately discounted or given a premium. The net present value method is also popular valuation tool used to estimate the value of the business. However assumptions around the terminal value and discounting rates could influence the number.

Valuation of a business depends on a number of factors - the key ones include the market potential, competitive advantage, differentiated offering from the business, the company management, capital efficiency and ease of exit.

Once an agreement is in place in terms of the valuation, the company and the fund sign a term sheet broadly explaining the following tenets that will get incorporated in the main agreement:

o   Value of the business and revised shareholding structure

o   Rights of the new investor and composition of the Board

o   Conditions precedent

o   Warranties and indemnities

o   Closing conditions

-          Diligence and business model

Once the term sheet is executed between the company and the fund, the fund takes steps to conduct the financial and legal due diligence of the company. This process would involve verifying the books of accounts and legal documents of the company to get comfort on the financial health of the business and an assurance on the compliances. Red flags raised in the course of this process would have an effect on the investment. However, the magnitude of the differences is measured and decision on investment is taken accordingly.

Of late, funds also conduct a commercial due diligence and a back ground check on the company and its promoters. The commercial diligence process helps the fund to get an assurance on the market condition, competitor behaviour, customer feedback, key industry metrics and exit options. The promoter background checks helps the fund  to get assurance about the promoter and key management employees – their family background, professional standing, social status, past and present litigation and financial standing.

-          Structuring the investment

 

The fund investments in the company are normally structured in one of the following forms:

 

o   Issue of Equity shares

o   Issue of convertible preference shares – preference shares are converted at the time of exit into equity shares at a pre-determined price

o   Issue of convertible debentures – debentures are converted at the time of exit into equity shares and pre-determined price. The debentures would continue to earn interest during such period till its conversion to equity

o   Issue of warrants – warrants are converted into equity shares at a predetermined price and date.

-          Board Responsibilities

The fund’s entry into the company is formalised through a Shareholders agreement and a Share Purchase agreement. This agreement covers in detail all the rights, duties and obligation of the fund and the company. The agreement would detail out certain key decisions that would always require the approval of the fund. Some of the key decision areas would include – new acquisitions, fund raising either through debt or a new investor, hiring and firing of key employees, approval of business plan, major capital spends etc.,

Exit Process

LPs investing in private equity as an asset class usually have a long term view. The life of a fund is normally between six to ten years – right from the fund raising process to investing and the eventual exit from the investments.

The fund would look at exiting their investment in the company at an appropriate time depending on a number of factors like macro market conditions, company position and standing, board and company alignment towards exit and potential suitors keen to invest or acquire the company.

The exits could be through a number of different routes for the fund depending on the size of the company, the market for the company’s product, the promoters plan to either stay or exit their shareholding etc.,  The exit options are therefore dependent on these factors – the most commonly used exit options are:

-          Through an Initial public offer (IPO)

-          Sale to a strategic investor – either a partial sale or a complete buyout

-          Sale to a financial investor, which could be another fund 

-          Promoters buy back – in case the promoter wishes to consolidate the holding or assuming no buyers are interested in buying the fund’s investments.

In conclusion, investing in a private equity fund would require immense patience, faith and understanding of the process. While the financial returns and gains could be disproportionately high, the ability to find the right portfolio to invest is challenging and requires a lot of research and study.

Shashidhar Jayaraman works in a private equity firm, and can be reached at jshashidhar01@gmail.com. The views expressed in this article are his personal notes and do not reflect the views of the organisation that he works or the Institute.

 

THE EVER EXPANDING ROLE OF A CHARTERED ACCOUNTANT

this article examines the  role of the chartered accountant and what it takes to succeed in a challenging and highly competitive corporate world.  This article appeared in the July 2012 issue of the The Chartered Accountant Student Journal published by the Institute of Chartered Accountants of India.

It is quite interesting to see how the role of finance professional has morphed over the past few decades. The traditional accountant is now more at home as a solid business confidant. Business managers have started to appreciate the contribution that a finance manager would bring in to an operating role and therefore the importance of being a chartered accountant is now actually  measureable”.

What has led to this transformation and the broadening of the role? There is no one factor, but a number of internal and external dynamics that has worked overtime to evolve the role and the broadening of the scope.

The starting point however is the course itself - the Chartered Accountancy course prepares young professionals like you in a thorough manner. There are some cynics who could possibly say that the Chartered Accountancy course is a finishing school. Be that as it may, it still gives a holistic understanding of a number of varied subjects, which possibly very few singular courses would offer.

Over the last few decades businesses have started to appreciate the financial acumen and business familiarity of a finance manager. A finance professional acts as the glue between all the operating functions and tries to bind the strategic and business objectives together for the achievement of the organisation’s mission. This is a vital role that every finance professional should understand, grasp and execute.  As a key member of the management team, the finance professional is required to provide the business with specific outputs around the health and shape of the business, important productivity metrics and useful what if scenarios. The finance professional should also have a good understanding of the regulatory framework.

But, to build scale and stature in the organisation, it is critical for the finance professional to possess a few very vital character traits and I have tried elaborating in the following lines below:

The vital character traits

Be curious

There will be innumerable moments in our life, when we would have to move out of our comfort zone and actually do the task. In our world as finance professionals there are no boundaries as far as knowing and delivering in the work place is concerned. We need to keep looking at new things all the time – in our own functions and also across functions. You never know, when and how the next new idea would germinate.

Challenge the assumptions

I have always believed that in our profession it is extremely important to keep questioning. Today’s environment is challenging and full of uncertainties.  At every stage in our professional lives while we deal with our functional colleagues, vendors, consultants and the bureaucrats it is imperative that we do not assume what is being said and we should not go with the tide. We have to look beyond the assumptions and get convinced that this is the fair way of conducting business. Let me illustrate this point further. All of us know about the two cola companies in India– a few years ago both these companies were in the thick of controversy and the issue remained in public domain for quite some time. All this while, both these organisations had famously positioned  volume growth and market share gain as their only objective and therefore had limited regard to achieving the financial goals – mildly put churning profits in the Indian markets was a long term objective. This controversy made them think differently – the dwindling volumes made them restructure their financials. They started reviewing their productivity parameters and balance sheet items with a very open mindset. In some way, the controversy was a blessing in disguise and made them look at their businesses differently and suddenly in spite of all the external challenges the companies were returning monies to the shareholders. 

Be a solution provider

 We will have enough challenging moments in our lives and it is critical that we are able to maintain our balance and are able to address the problem than living with it. I know of a very senior professional who always encouraged his subordinates to come up with alternative solutions even if it meant that they were idiotic. It is important that we let our minds wander and work overtime. As someone said “the most common cause of executive failure is inability or unwillingness to change with the demands of a new position. The executive who keeps on doing what he had been doing successfully is bound to fail.”

Constructive criticism

There will be moments in our professional lives when we make mistakes and we  are constantly on a denial mode. It is important that at such times we course correct based on inputs that we receive from our peers, partners and supervisors. Accepting constructive criticism goes a long way in building our character.

The multifaceted roles

There a number of varied roles that a finance professional can exercise and play. Very few operating functions can offer a similar kind of depth and coverage. I have been in this industry for more than 2 decades and I must admit that it is fascinating to see just how many different kinds of roles that are available for a finance professional – within the same organisation or in a different industry. I have always believed that the foundation for any finance professional should be strong and well rooted  – and if this were so, he would be in a position to take up any challenging assignments.

I believe that a young Chartered Accountant should start his professional innings in a line finance function – which could either be a sales accounting role or factory accounting, or an analyst or front office manager in a bank.  Each of these roles are customer facing and would expose the professional to the real world around him. As the professional grows in the organization the exposure to different roles and positions become imminent. The four character traits that I have mentioned above, if used well and with a positive mind would accelerate the growth of the professional. And as the professional moves up and lateral in the organization, his maturity and his ability to deal with people around would help him develop and build on his interpersonal skills which are very critical for a professional as he moves to leadership positions.

A finance professional is very uniquely positioned in an organisation – the company believes that the finance professional is the default organiser and is expected to play the role of a coordinator, a summation expert, an advisor and the conflict resolver. And this expectation is thrust upon him irrespective of whether he is in a senior management position or in a middle management position working in a regional set up. This sense of trust that a finance manager enjoys in an organization is unique and his ability to judge and influence decision making holds him in good stead in his career and growth. Not surprising therefore that a number of mid-sized corporates in India told have a Chartered Accountant at the helm of affairs and they are very running the organisation well.  The true test of a finance professional lies in his ability to maintain balance, patience, pragmatism, practicality, a good sense of the world around him and above all solid inter personal skills.

How does a finance professional grow in an organization? In a matured multinational corporation the finance professional starts in a line function and then in due course he moves on to a specialized role. The organisation would pause here and figure out the strength and the areas of improvement before positioning the professional in another line role or in a specialized role before he graduates into a leadership position. I believe that a similar career path is followed across all industries – whether in service or manufacturing. Large organisations are moving finance professionals to lateral roles in other functions and providing them with a general management experience. This is a reflection of the potential of finance professional. More and more finance professional are moving into general management roles and taking in positions of authority and leadership.

Conclusion

Finally, there will be innumerable challenges in our professional lives and it is critical that we take a balanced view and work towards pragmatic solutions to those challenges. As Martin Luther King Jr said and I quote “The ultimate measure of a man is not where he stands in moments of comfort, but where he stands at times of challenge and controversy”.

Shashidhar Jayaraman works in a private equity firm in an investing role and can be reached at jshashidhar01@gmail.com. The views expressed in this article are his personal notes and do not reflect the views of the organisation that he works for or has worked in the past.

Resilience

There are moments in our professional lives when we need to deal with difficult circumstances – positions created entirely by the external environment and beyond our control. I am about to write about one such professional manger – and I tracked him from a distance. I am writing about him because he had seen extraordinary situations in his professional life – not his doing, but he displayed immense tact and maturity in handling them at the cost of sacrificing a lot of his personal time.

Jose started his career as Supply Chain specialist in a large manufacturing company and moved there after to consumer products multinational in a similar role. In course of time, Jose moved from his core area of specialisation to a general management role. He went on to lead large teams in diverse geographies and dealt with complicated situations.

Let me write about some of his character traits that I took note of:

Tough, mild at heart

Jose displayed an appearance that wasn’t suave, charming or polished – he came across as a simple, no nonsense, to the point person. His tone was aggressive and specific – he did not beat around the bush. Diplomacy and tactfulness was never in his dictionary. He projected his image as a tough task master – but probe in him and you would know that he was a kind, gentle and a thoughtful human being. During his stint in various roles at different geographies, his team got to know more of him and therefore got to appreciate him better. Soon, they realised that it was easy to work with him and get a number of their initiatives approved.

Well prepared

Well, in the organisation that Jose and a number of other wonderful managers (whom I know)worked - being on guard and being able to demonstrate and read the market for any unexpected situation and occurrence had to be a natural trait. Managers were expected to exactly know how consumer preferences and choices moved and were expected to come up with solutions. A tough position to be in – but not so, if you have a well oiled and established set of team members and trade partners. Jose worked tirelessly and had a team in place – he was always well prepared and had the pulse of the market in his fingertips. I must say that there were very few managers who had their ears to the ground and I must say that they managed their work more through their experience than hard reality.

Survive extraordinary circumstances

Jose survived through a very difficult phase in his life – both professionally and personally. Many of us would have requested a change in role and moved to another role – but Jose was different. He remained in the location and fought against all odds and came out winning the war. He was tough, resilient and level headed – he did not want to leave the location, when things were completely amiss and torn apart. The trade partners were at war with the organisation for implementing certain proposals that did not go well with them – and they targeted Jose. Heading a sales unit in your home state may at times prove difficult and Jose went through this process of educating and working with his trade partners to get their support. He eventually succeeded – but he did so with a lot of personal difficulty and trauma.

Respect processes and systems

I might be upsetting a number of my peers and colleagues - but I must mention that managers who have moved from other functions and headed sales have possibly displayed more maturity and positivity towards processes and systems. Jose was one of them – he expected other functions like marketing, finance, human resources to work alongside and contribute to the sales organisation. He believed that an efficient sales organisation could be sustainable only if there are long lasting and strong processes in place and he supported all practical tools that were being implemented by other functions. Many traditional sales managers had strong views against interference from other functions, but Jose was different.

Break and build

Jose had an uncanny ability to start afresh in any role that he moved in – he did not disregard the existing process – he refined it. And in doing so, he had to take tough measures, acts that were perceived unpopular.
When Jose moved to a different geography within the sales organisation – he felt the need to revisit and restructure the “go to market strategy” – he believed that the traditional mode of selling was not helping the organisation and therefore a new refined process needs to be experimented and put in place. The new methodology was not well accepted within the organisation and the process of change had its share of anxious moments. But Jose believed in himself and his team – he relentlessly travelled, educated the trade partners, trained his team, and sought support from the functional experts. Eventually, he was able to put in place a sales process and management that would be long lasting and sustainable.But in the process he had to live with difficult situations – both within and outside the organisation and patiently work with the stakeholders to implement the strategy. In the same market, he eventually grew sales numbers and got recognised and was awarded with the top sales honour.

Probably a lesson learnt here – Jose did not walk in to a job straight from a management school – he came in with tons of hard core operating experience, with the pulse on the ground and an attitude oozing with positive energy. Jose did not qualify as a classic sales manager – he moved from a different environment and therefore looked differently at the task at hand.

The People Man

In my close to two decades of professional experience, I have come across very few managers in the Human Resources function who actually “walk the talk”. I am sure a number of you around there would possibly dis-agree to my comment – but I must admit that I still have a number of good, up and close friends in the HR function across the few organisations that I have worked. My HR friends would tend to say – that the vagaries of their role make them play the part that seem to get them projected as an unemotional, impersonal and at time rude colleague.

But, then I am going to write about someone – and let me address him as Amit, who fortunately, I got to know early in my professional career.
Amit comes across as a refreshing personality in an otherwise much disliked department in the organisation. He does to profess to throw his weight around given the position that he enjoyed, but his relationship skills across functions were amazing. He had the ability to retain his temperament in the most difficult circumstances and come up with solutions acceptable to all.

I must recollect an incident that took place many years ago down in Southern India - in a factory where Amit (Amit is a Delhiite and has never stay outside of Delhi....) was posted as the Industrial Relations manager – his first job surrounded by a highly volatile labour union, a difficult local language to understand and respond, a difficult boss to work with and last but not the least he was working in an organisation that was possibly not passing through its best times then. And, the factory in the vicinity had all the positives with them - a highly profitable organisation, with the best local talent. Fortunately the labour union at both these places was controlled by the same political party. Amit used his persuasive skills, engaged in patient dialogue, conversed and worked with the workmen, visited their families and represented the company’s brief and managed to get the labour agreement executed well within the time frames. Our neighbouring factory went on strike much at the same time. This incident goes back to 1993 and I still marvel and talk about Amit and his art of managing a potentially volatile situation to young professionals. My respect and admiration for Amit keeps going notches up, every time I hear about all the right actions and policies that he continues to implement in his organisation.

There are a few traits that I must write about Amit :-

Very apolitical - unheard in the HR profession

As I said, he comes across as a very apolitical manager. He is instantly and genuinely liked by managers across functions – in many organisations there would possibly be an instant disliking for the HR function and its policies, especially during the appraisal period. Amit had this magic wand with him to get managers rally around him without compromising on the core HR policies and beliefs. He is possibly the most popular HR manager in his current organisation – and I am sure many who work with him would agree as well. Many outsiders would not know that it in a span of few years, Amit was actually heading the HR function with some of his superiors reporting in to him.


Emotions come first

With Amit, it is always the person before a process or policy – he has an inherent ability to read a person well enough to speak in a personalised language. Many organisations have a stated policy that “employees come first” – very few actually have the right managers to implement. Amit’s organisation had him around and his influence worked wonders.

Balanced and clarity of thoughts

He had this uncanny ability to ponder over a point trying to hear all the voices before agreeing to pass a judgement. His ability to listen, observe, be patient and maintain calm ensured that the eventual decision making was clear and unambiguous. What sets him apart from the rest of his clan is his ability to maintain composure and never lose his sensibilities. And for his decision making ability and stooping personality he remains the ever popular “Tau” to his colleagues.

Pragmatic and solution oriented

HR policies and processes are good on paper – however to have them implemented in the field requires policies to be tailor made and practical – and it needs a lot of will, hard work and supervision to actually drive and get employees acceptance. It is also equally important that at regular town hall meetings, the HR system hears the employees and tries to directionally address suggestions that come in from the field. Amit followed an open door policy thereby ensuring active participation and evolution of a well balanced HR process.

Before I wrap up, I must relate to another story.......

This incident left behind a lasting impression about the emotional side of Amit – Amit had this young colleague and roommate (at his bachelor pad) and this roommate was constantly looking around for options outside the organisation. Amit played a dirty prank on this fellow and enticed him to attend a fake interview. And when this person was about to leave home, Amit called the bluff – you would agree that Amit was indeed cruel to the poor guy...the guy left home very sad and hurt. And when he returned to the pad....and walked to his bed room.....he notices messages of forgiveness all over the room - and a mattress replaced with a bed of the choicest of mangoes (the lad loved mangoes).

I am certain that a many HR managers would possess these traits and would wonder why I am idolizing Amit – but, guys, you should meet and work with him to believe what I have written.

Patience and Perseverance

Patience and perseverance are virtues that a manager imbibes over a period of time depending on the situation and the environment he operates. A good manager would have cultivated the right kind of knowledge, talent, wisdom, trust and attitude.

I will relate this character to someone whom I have known closely and worked with – Ajay used to head a beverages company in a southern state in India. We worked at a time when weather forecasts and therefore predictions were a bit uncertain and abstract. We needed to wade through this period of uncertainty and come out well in our business. I am writing below a very critical character trait that every aspiring leader has to necessarily build on and posses to move up the ranks.

I observed that Ajay had all the traits of a good business leader – but the enduring quality that I noticed in him and that remained with him is his ability to persevere in his thoughts and actions and his ability to be patient in trying and tough times. Let me try and illustrate some of his character traits in the ensuing paragraphs.

Be a keen listener

It is important that a manager hears the “unsaid”. In critical moments and trying situations the calm and the composed manager picks up every detail of points discussed and use them to frame his thoughts and actions.
Ajay conducted weekly meetings with his sales organisation and ensured attendance of the other functions as well – he wanted to hear from the “others”. Sales organisations in a consumer products company are considered “one up” over the rest of the functions. Ajay was different; he heard the others and needed to understand the pulse of the market. He heard all of us before he decided his strategy.

Being patiently attentive is an important attribute of a good leader – while he could chart the course of a discussion, it is useful that the leader ensures that every member has a say.

Remain calm and composed

Ajay was responsible for selling a very seasonal product and 60% of the revenues of this were achieved in the summer months – it so happened that in one of the year, the rains set in earlier than expected, impacting the sales significantly. The head office did not take the sales drop kindly and deputed some of their best minds to coach Ajay and his team in the art of selling. Ajay had a fairly cherished professional background and this kind of tutoring that he and his team were subjected was uncalled for. But he took them in his stride, counselled his disturbed team and executed his plan according to the needs of the market and he understood them well. Ajay could have been a fall guy, if he had taken the corporate managers head on and questioned their wisdom – but he chose to retain his character and importantly ensured that his team remained composed and calm. As someone said “Courage is not limited to the battlefield – the real test of courage is much quieter. They are the inner tests like enduring pain when the room is empty or standing alone when you are misunderstood.

Think objectively

One another important attribute of a patient leader is his ability to think clearly, unfazed and uncluttered. There are leaders with creative ideas and strategies but they fail in their communication and lack the ability to share their ideas in a structured manner with a larger audience.
Ajay had an uncanny ability to think and act objectively – the unseasonable rains had impacted the sales of his products and to undo the impact Ajay had to work out a different strategy – he assessed the market dynamics and strategized and when the chips were down and turbulence around, he gauged the market situation differently and presented his solution


Perseverance

I picked this quote from a book, it says and I quote “I do not think that there is any other quality essential to success of any kind as the quality of perseverance. It overcomes almost anything including nature.”
Patience and perseverance go hand in hand – one need to be extremely well prepared, planned and informed before executing a task at hand. A lot of hard work and thinking goes behind executing a task – you need to have the ability to take failures in your stride as you look at the larger picture ahead. And you would be well equipped to achieve your goal, if you have the ability to endure long hours and assess all alternatives, however trivial they might be.

Perseverance as exemplified by this worthy man’s quote “Nothing in the world can take the place of persistence. Talent will not. Nothing is more common than unsuccessful men with talent. Geniuses will not, unrewarded genius is almost a proverb. Educations will not, the world is full of educated failures. Persistence and determination alone are omnipotent.

Message clearly

As someone said “the ability to simplify is to eliminate the unnecessary so that the necessary may speak.’ Ajay personified this statement aptly. In a number of situations in the work place a firm stand had to be taken and conveyed with assertion. Ajay would endure the time spent in understanding and hearing his team and peers and would convey his decision well crafted and in simple terms. Many contemporary managers actually either are unable to reach a decision or leave it to their next level to take a decision.

I have gained immensely working with him and I hold him in high regard for having made me a better individual.

Trust and Delegation

In some organizations, Finance is still considered as a function responsible for carrying out basic maintenance roles – for example being responsible for the books of accounts, completing the annual accounts and ensuring filings within the stipulated dates.

Over the years there has been a perceptible change towards the finance function in large corporations. Finance is now recognized as an all pervading function working closely with the head of the business in creating the long term vision, setting up the building blocks and working on implementing the plan to action. From being consigned to the back offices, the function has now positioned itself as a very visible and value adding face of the organization. And how did the metamorphosis of the function take place – one of the possible explanation is the exposure provided by large body corporate, especially multinational companies to the finance employees in their organization – to get them responsible and accountable along with the business managers for business results. Multinationals were the breeding ground for finance talents - to broaden their role and their activity from being merely accountants to being business finance managers.

I am going to discuss about one such manager – his name is Ravi – and he impacted the lives of a number of his finance colleagues with his functional knowledge, leadership skills and wisdom. Ravi took over the reigns as the Chief Financial officer and one of his immediate and important decisions thereafter was to convene a forum called the Finance Leadership Team (FLT) – the FLT consisted of all the region finance heads and the finance specialists at the Corporate office. The team met every 3 months and the manager ensured that there was complete independence and transparency in the discussions within the team. And, why would I glorify Ravi’s initiatives, because of the following traits that he exhibited….

Trust – Ravi came across as a very straight forward and transparent person, with no personal interest in his decision making process. He expected similar reciprocation from his team. Truth, candor and integrity formed very high on his agenda – and he spread this message pretty clearly with the team.

Participation – Democracy as is ideally defined actually got reflected in these meetings. Ravi allowed the team to be transparent in their thoughts, allowed complete independence, and sought feedback from the team on his views, considered the team’s views constructively while arriving at a decision. Through these meetings, important decision on people and processes were arrived and implemented.

Delegation – A good leader as they say is identified through his ability to delegate work effectively to his team members. Delegation isn’t easy unless, the leader is entirely confident about his team member and their ability to get the work done. Truthfulness, confidence, participation and integrity of the team member determine the level of delegation – and Ravi was able to assess his team members and use them well in his endeavor to build a world class finance organization.

Passion to promote – The business leanings of the leader tend to rub off fairly well on the team members – and Ravi’s ability to remodel the finance manager role as a business planner did wonders to the finance professionals working with him. It actually opened up and broad based the thinking skills of the finance professional – moving him from an accounting role to a business finance role. Having said so, a fair amount of balance was maintained between working with the business and retaining accounting credibility.

Defend and Protect – While Turf wars were not common or heard of, it is important for a leader to keep his folks united and insulated from difficult and unreasonable expectation from other functions. A finance professional was expected to stand up and be heard in intense discussions – and at times be the messenger to carry the bad news. And as they say, you gather the strength and the courage to speak and be assertive - when you are confident of being backed well by your leader. In our own experience, Ravi did rule by example and at times had to take difficult decisions impacting his own fraternity.

Grow – Leaders are identified with their ability to spot and judge the performance of their team members and develop a career plan that suits them. In the process the leader is able to build a long lasting finance organization with natural succession and growth plan for the team. Ravi used his networking skills across the global organization and successfully placed a number of deserving team members in international assignments – speaks of his ability to spread the talent across geographies and markets.

And personally, I must mention atleast one incident that impacted me directly - we relate and seek support from our immediate manager when we are being tested in difficult waters and circumstances. We were at the receiving end in one such phase in our business - dramatically revisiting our business model with the changing market construct. The business model had a number of sweeping changes in the way we did business – impacting the sales and operations organization significantly. Finance led the charge towards formulating and implementing these changes and the support here from Ravi was critical – and he backed us through the change process both at the regional level and at the corporate level.

I am not sure whether in the past finance managers displayed assertiveness towards the businesses and their people in the same manner. The birth of the finance clan (let me call them) “the Class of 80s” has changed the rules of the game and has laid a solid foundation inspiring the current lot of finance managers.