The road to success
“No problem,” said Vikas. Opening the fridge, he pulled out a bottle of Kingfisher. The bottle was frosted with miniscule drops of condensation. He opened the bottle and poured the beer into a mug. “What about you, Chander?”
“I’ll have a whisky, thanks”, said Chander, “ and I’ll do the honours myself.”
The three friends settled down with their drinks. This was good – no wives, no kids, just men and their best friends. Tension visibly seeped out of bodies.
“Hey, Vikas”, said Suresh, “you seem preoccupied about something. Business or personal?”
“Oh, business as usual”, said Vikas.
“What is it, man?” asked Chander.
“Welllll”, said Vikas, “its this thing about incentives and disincentives for the guys in our company. My MD asked us to think about ways and means to motivate the staff to achieving more, and I have been trying to think of some.”
“Why, is there some problem with your people?” asked Chander, cocking an eyebrow. “You’ve always raved about what a great bunch of guys you work with. Has the dream gone sour?”
“No”, said Vikas emphatically. “Our team is great. Yeah, there are the one or two who let their colleagues down, but what the hell, that happens in every organisation. It’s just that the company hasn’t been doing too well. Sales have leveled off, profits are more a function of creative accounting then actual performance, and expenses are still hovering around the stratosphere. We just don’t seem to be getting into top gear. So we thought, may be we need to motivate our guys to walk that extra mile, to reach for that faraway star.”
“Uh uh”, said Suresh, sinking deeper into the sofa. “This beer feels good, man.”
“Wait a minute,” said Chander, sitting up. “I don’t seem to be getting the connection. What have incentives got to do with the company not doing too well?
“Come on Chander’, said Vikas, irritably. “You’ve not finished your first drink, and you’ve started asking stupid questions.”
“No, I am serious”, said Chander. He looked it, too. “You made a quantum leap here. Your company is not doing too well and you are looking at incentives for staff, in the hope that that will solve all problems.”
“No! That’s not it”, said Vikas, “this is just one of the initiatives that we want to put in place. We are still on a fixed package system, and thought that it would be better if rewards could be linked to performance. It will make people feel better, as well as give them a push to achieve more.”
“One sec”, said Suresh, making his first contribution, “let me understand this. Can you start from the beginning? Why is your company not doing too well?”
“Welllll, as I said, sales have leveled off. The competition is terrible. Almost every sale is a price war. The market seems to be going nowhere. We have lost one or two major contracts. One of our business sectors is just not progressing. Ah, what the hell, why am I boring you guys? Who wants a refill?”
“I’ll get my own, thanks”, said Chander, walking to the sideboard. “Can I ask you a question? Are all paint companies facing the same problems? Or is it just you?”
“I don’t know”, said Vikas, honestly. “The thing is that we are not supposed to do badly. We have a great team, we have a great production facility, we make superb products, we are an MNC and have the reputation and credibility that that lends,… I just don’t know.”
“Uh uh”, said Suresh, “famous last words. Just because you are an MNC and make top quality products in a top quality plant, you believe that you should succeed? No way, man. If that was true, you and I would be flying Concordes to Mumbai and Lucknow and Tirupur!”
“Yup, he’s absolutely right”, said Chander, nodding his agreement. “products and quality are only one part of the jigsaw. Tell me, Vikas, what is your company’s strategy?”
“To make money, of course”, said Vikas promptly. He had fallen under Eli Goldratt’s spell about 3 years before, and was still firmly enmeshed.
“Dummkopf, that’s your goal or objective”, said Chander. “What is your company’s strategy to reach that goal?”
“Well, er, to service our customers better…, provide better value…, to dominate the niche markets that we are operating in?” said Vikas tentatively.
“Not bad”, said Suresh appreciatively, “ you have just paraphrased 93% of the management gurus in existence. That’s great, but do you guys have a specific strategy?
“Yeah, an action plan that is laid out by industry, market, target market, product and service strategy, pricing strategy, distribution strategy, sales strategy, promotional…”
“Hey, hey, hey”, interrupted Suresh, “what’s this? Been boning up on management skills? Where did you suddenly spout all this from?”
“Come on, Suresh”, said Chander, “I am in the business of creating new businesses. Every time I set up a new venture, I need to go through this exercise. Doesn’t everybody?”
“See guys, I know that we have a strategy. But whether it is in such detail and specifically laid out, I am not sure…” said Vikas, looking not very sure of himself.
“Look, Vikas”, said Chander, “you are a senior manager, isn’t it? If you are not sure of whether your company has a clearly laid out strategy for each business, than who is?”
“He has a point”, said Suresh, sitting up and leaning forward. “We guys were doing about INR 10 million 8 years ago; today we are doing about INR 200 million. This is because Jennie D’Silva set out a comprehensive action plan in 1993 and we have followed it to the “t”. That bunch of 6 pages is a damn bible in our company!”
“What does it say?” asked Vikas, “does it talk about everything Chander mentioned in detail?”
“Come to think of it, it does”, said Suresh, getting a little excited. “I never really thought of it, but that’s right. It measures the industries we are targeting. It examines the markets, it specifies whom we should target, it dissects our competitors in great detail, it sets out how we should price our services, how we should sell…man, that is some document!”
“Suresh, have you had reason to change it in the past few years?” asked Chander, “considering that India’s economy has been changing quite a bit?”
“No”, said Suresh. “There are addendums and appendices, but the basic document hasn’t changed. Once a year I xerox the pages and throw the old ones away. See guys, basically, the action plan is not a tactical plan. It does not tell us whom to meet in which company and say what. To put it poetically, it lays out where we want to go. It lays out the territory we are travelling in, the climate we may encounter, and the dangers and pitfalls. It maps the road on which we need to travel. It lays out a few rules of the road. But, other than that, it does not constrain us to specific actions.”
“Exactly”, aid Chander, “this is exactly what I do. Draw up maps. Do you have a map in your company, Vikas? And more importantly, does every member of your company have a copy of that map?”
“Well, to the first question I will answer a conditional yes”, aid Vikas. “We do have meetings and discuss our short, mid and long term plans. We did have a couple of brainstorming sessions some months ago. But, as to the latter, it is a definite no. What there is of the map is known to the managers, if that.”
“Good for you, Vikas. At least you are honest with yourself.” Said Suresh. “To celebrate such naked soul searching, I am opening another beer! What about you guys?”
After their drinks had been refreshed to their satisfaction, the three men went to the balcony to light up cigarettes. “Ah, that’s great”, said Suresh.
“Okay”, said Chander, “let’s look at this issue further. Let us say that your strategy or what there is of it, suffices. What about your tactical plan? Has your company planned out the resources to back up the strategy? Men, material, money, whatever? Are you sure that the problems you are facing are not systemic rather than specific?”
“What do you mean?” asked Vikas, smoke swirling around his confused face.
“See, as I know it, you need a strategy; and then to service this strategy, you need a resource plan – a document which details how you are going to put that strategy into action. To take off from where Suresh left off, this plan tells you when a bike will be enough, when you will need four men and a palanquin, and when you will need an all terrain vehicle with GPS compatibility.”
“Yeah, I get you”, said Vikas, “we do a budget every year and also estimate our resources and costs for a year or two following that. Is that what you are talking about?”
“No, Vikas”, said Chander, patiently, “a budget is an operational document that draws from a tactical document. This is the resource roadmap. Let us say that you are planning to enter a new market next year, and another the year after that. What will you need to arm yourselves to successfully enter and dominate these markets? Will you need four additional people? Will you need to enhance your manufacturing line in a particular product category? Will you need new branches in three new cities? You will need to plan ahead, won’t you?”
“Uh uh. Well, I suppose that is in the domain of the business managers”, said Vikas, tentatively, “I am sure that they are…”
“Bullshit!” interrupted Suresh, explosively. “Vikas, you are not firing on all four cylinders today! What Chander is talking about is not limited to the domain of one business or one manager. This is information that should not just be available to every member of your company, but must actually be thrust down their throats!”
“Relax, Suresh”, said Chander, “can’t you see the guy is confused already?”
“No hassles, yaar”, said Vikas, smiling at Suresh and Chander. “This guy gets excited once his alcohol level crosses point one percent! Anyway, you are making sense, and no, there does not seem to be any such resource roadmap in our company. At least, not as far as I know.”
“Okay, we’ve come so far, we may as well go the rest of the way; Vikas, do you think we can catch some pizzas?” asked Chander.
“No hassles”, said Vikas, opening the balcony door, “I’ll just call Chef Express. You guys have any specials, or shall we go for the whole hog?”
“Ah, anything will do”, said Suresh, “just make sure they pile on the jalapenos.”
Vikas moved into the drawing room, and shut the balcony door.
Suresh turned face the vista ahead of them. “Man, this guy is really lucky – what a view!”
“Yeah, sure”, said Chander, obviously deep in thought. “Tell me, Suresh, does your company have a resource plan?”
“What? Oh yeah”, said Suresh turning to Chander. “Though not as detailed as you describe it. But then, we are a service company – if we plan our people, we are half way there. And we do that well in advance.”
“I thought you would”, said Chander, smiling. “I can’t see a market research company not following the advice they dole out to their pitiful clients.”
“Oh, perish the thought”, said Suresh, smiling too. “If we followed every piece of advice we gave our clients, we would either be Microsoft or we would have gone bust long ago.”
The balcony door opened and Vikas came out. “Okay, folks, the deed is done. Can we continue where we left off? It was just getting interesting.”
“Of course”, said Chander, “I have been thinking up some questions. Tell me, how many years has Denso Paints been in India, and of these, how many years have you met your budgets?
“Welll, we came into India in 1995; we achieved our targeted sales in 1996-97. The other years, we did well in one or two businesses, but on the whole…”, said Vikas, trailing away.
“Then, if that is the case, why are you looking at incentive plans?” asked Chander. “I thought incentive plans were to help stretch the envelope, not just to fill the damn thing. Aren’t your guys being paid enough?”
“Oh, I think we are quite decently paid”, said Vikas, grinning. “But enough? Never, buddy.”
“Then, what with the incentive plans?” butted in Suresh.
“See, as I told you, we are on a fixed package”, said Vikas, “and that does not seem to be delivering results. We were concerned that this complete lack of a system of rewards for high performance may demotivate people and discourage them from going all out to achieve.”
“Oh, I agree with you,” said Chander, nodding. “Rewards do need to be linked to performance. And so does punishment. But that comes later, I thought. Let us say you have a guy in one of your sales team. Let us call him John. Now, you give John a target to achieve, let us say a hundred thousand litres of paint for the year. On what do you base this target?”
“See, each business sector draws up their targets and budgets. Based on this, each member of the team is given a target to achieve,” said Vikas.
“But, how”, Suresh interrupted again, “do these business sectors draw up targets if there isn’t a clearly laid out strategy and action plan for the company? What do they base their estimates on?”
“It is the understanding in the company that the business managers know their businesses…”, started Vikas.
“Great”, said Chander, “do they share this knowledge with all the others? Can this knowledge withstand rigorous questioning?”
“I am sure it can”, said Vikas, “after all these guys have been in the business for more than fifteen years. If they don’t know the business, who does?”
“Now, don’t go defensive on us”, said Suresh, raising his hands in mock fear. “We know you think a lot of your friends. But seriously, I do not understand this – if each of your business managers know their business as well as you claim, and they draw up their budgets and targets, then why has your company not achieved these targets each and every year?”
“What are you getting at?” asked Vikas, getting irritated. “I thought we met to have a decent evening together, and you guys are grilling me as if…”
“Come on, Vikas”, said Chander, putting his hand on Vikas’ shoulder. “We are not trying to piss you off. I am only trying to understand where Denso is coming from. If you give John a target of a hundred thousand litres, what you are saying is that this is a figure out of the hat. Is that it?”
“No, I am not saying that”, said Vikas, indignantly. “The business managers build up a budget for the coming year, and I am sure the sales guys play an important role in this exercise. Then, the budget is approved by the MD, and the team has to run with the ball.”
“That does not answer my question”, said Chander, shaking his head. “Where does this figure of one hundred thousand litres come from? Is it based on customer requirements or projections? Is it based on regional market intelligence? Is it based on an understanding of market growth trends and patterns? Where does this figure come from? Because, it obviously does not devolve from a mid- or long-term strategy.”
“Why are you fixated on the hundred thousand litres?” asked Vikas. “What has that got to do with anything?”
“Because, my friend”, said Suresh sarcastically, “if you thought about it, you will understand that you could be setting up John for failure! And then, not all the incentives in the world will help!”
“Exactly!” exclaimed Chander. “How do you know if this figure of hundred thousand litres is achievable? Or could it be that it is too little, and that you are not exploiting the potential available? In either case, any incentive plan has no meaning! Don’t you see?”
Vikas’ brow wrinkled in thought. Then his face cleared. “Yes, I do”, he said, though a little reluctantly. “I see what you mean…”
The doorbell rang. “Ah, the pizzas are here”, said Suresh enthusiastically. “I’ll get the door.”
“And most of the pizzas, no doubt”, said Vikas wryly, as he and Chander smiled, thinking of Suresh’s huge appetite.
The next few minutes saw the three friends arranging themselves around the pizzas, and digging into the cartons with gusto. “Wow, I really needed this”, said Suresh, enthusiastically crunching into an indeterminate mess.
“Yeah”, said Chander, with a faraway look on his face again. He looked at Vikas. “So, you were saying…”
“I get your point”, said Vikas. “You are saying that if we do not have a clearly defined strategy, and we do not have a tactical plan, then the operational one, that is, the budget, is meaningless. Okay, let us say I accept your argument. So an incentive plan for the sales staff would not make sense. But what about the others? The manufacturing guys, and the finance guys, and the technical guys? We can have incentive plans for them, isn’t it?”
“Welll, let’s see.” said Chander, wrinkling his forehead. “If you did, what would their performance be linked to? The number of litres they churn out? Or the number of cheques they print?”
Vikas thought about this a few moments. “No, we wouldn’t. Stand-alone functional measures make no sense. They need to be linked with the whole. So they need to be linked to the performance of the company…”
“Yes”, said Suresh, finally surfacing for air. “And the performance of the company is measured against the budget, which you hypothetically agreed is meaningless! So there goes the incentive plan for the rest of the staff.”
Vikas leaned back in his chair. “Okay, you guys are the experts. Tell me, what should we do?”
“No Vikas”, said Chander, gently, “we are not the experts. We are just using a 2500-year-old technique to dig to the roots of a stated problem. The dialogue. Ultimately, you have to develop the solutions to your problems.”
“Yeah, I understand that”, said Vikas. “But, seriously, what should we do?”
“Firstly, I believe you should not look at an incentive plan alone being the panacea to all your problems”, said Chander, seriously. “Yes, it can and will help, up to a point. Performance based reward schemes have been found to bring out the best in employees. But, that would be treating the symptoms. You need to strike at the root cause.”
Vikas was silent for a while. “Okay, here’s what I have understood”, he said. “first, we need to formulate a strategy for each business sector. We start with our mission statement and our objectives. Right so far?”
“Absolutely.” said Suresh. “Once your objectives are clear, you need to be sure that you, as a company, have a thorough understanding of the industry you are in, the markets you are playing in, your target customers and your competition."
“Great! Then, based on what you two guys said, you need to draw up a strategy paper for each business sector which contains the market strategy, the product/service strategy, the pricing strategy, the promotion strategy, the distribution strategy, the sales strategy. Once these are done, they will lead you with no ambiguity to the operations strategy, or your manufacturing and technical strategy.” This was Chander, ticking of the points on his fingers.
“Then what?” asked Vikas.
“Then you make sure that these strategy papers are put together to form a cohesive and interlinked company strategy”, said Chander, “and, finally, most important, this holistic strategy must become the bible that every single employee of your company memorises and breathes.”
“All this sounds good on paper, man”, said Vikas, “but what happens if the environment shifts? Then we are stuck with a bunch of crap!”
“No, you are not”, said Chander. “I agree that no strategy can be static. But, the core remains the core. What you do is what Suresh does. Any change in the environment has to be updated. And this includes the internal environment, that is, your company itself, and the external, that is the economy, the government, the industry sectors you are working in, etcetera. You can add appendices and updates any time. Unless there is a radical shift and Denso is going to sell T-shirts instead of paints, the core strategy, if it is planned well, will remain integral.”
Vikas lit a cigarette and inhaled deep. “Okay, let us say we try this out. What next? The resource plan?”
“Yes, absolutely.” said Chander. “Then, the senior management plans the resource requirement for the foreseeable future, which could be anywhere from 3-5 years. This plan, too is published internally, and is treated as the New Testament, if we have to continue using the bible analogy.” He grinned.
“So, now we have the strategy and the tactical plan”, said Vikas, leaning forward. “Based on these, and our ongoing knowledge of the businesses, we can draw up realistic budgets. Right?”
“Right!” said Suresh, blowing out a stream of smoke. “Now, you can start talking about incentive plans. When you know a budget is realistic and achievable, then you reward your sales guys for stretching. Then you are saying “Johnny boy, we are on our way to Europe. I have given you a reasonably accurate roadmap to Mumbai, for which I am paying you your salary to reach by the end of this year. However, if you go beyond Mumbai, and reach Karachi, I will reward you over and above that!”
“Wow, that makes sense!” said Vikas, excitement showing on his face. “And, to continue to use your stupid analogy, if we did not have a strategy and resource plan, our map would be useless, and we could be sending John to Calcutta, and not all his efforts and not all the potential rewards would help him reach Mumbai, leave alone Karachi!”
“You are right up to a point”, said Chander. “I wouldn’t agree with the last part, though. Remember that your sales guys are not fools. They are experienced and would need to be capable to have gotten a job in Denso. What would happen is that the guys would see your map, and instinctively disregard it. They would then use their inherent experience and talents to try and reach Mumbai, with the faint understanding that Russia is the place they are heading for. They may lack the support and resources that Denso could have provided. Even so, they may reach Belgaum or even Pune. Some of them may even make it to Mumbai and beyond. But that would not help Denso achieve its combined objectives…”
“Absolutely. I agree with that one hundred percent”, said Vikas. “And the same roadmap will help the manufacturing, technical and finance guys to make sure that the sales guys get all the help they need on their journey! So everybody works as a team. With the same vision, the same goal!”
“Yes, yes, yes”, said Suresh, triumphantly. “Now that we have solved all Vikas’ problems, do you think I can go home? I do need to sleep once in a while.”
“One sec – let me do a quick recap”, aid Vikas, “first, draw up a solid strategy, second, make sure everybody knows what the strategy is, third, draw up a resource plan, fourth, make sure everybody knows what it is, fifth, draw up the operational short term plan, or budget, sixth, let everybody know what it is, and seventh, now that you are sure to achieve the budget, or close to it, set up incentives to encourage guys to go beyond and above the normal, and do the company proud!”
“Perfect”, said Chander, rising from his chair. “Now comes the difficult part. Putting what you just said into action. Getting your MD to buy in. Getting your fellow managers to buy in. And, then, once you have achieved all this, you can dream about earning the salaries that Shirish does in Infosys.”
“That’s a good thought to part on”, said Suresh, lacing his shoes. “Or is it? Every time I think of Shirish’s pay packet, I get heartburn!”
“Thanks, guys”, said Vikas, accompanying them to the door. “I am lucky I have friends like you. I’ll keep you posted on how this turns out. Good night, sleep well.”
“Good night.”
“Goodnight, Vikas.”

