Opinion

Enhancing the lifespan of organisations

Updated on: Jan 17, 2022
Planet, People and Profits must be the mantra for companies

Planet, People and Profits must be the mantra for companies | Photo Credit: WEERAPAT W.

In these uncertain times, companies that adopt the ESG framework will be on a firm footing

M. Srikanth / P Siva Rama Prasad

The business landscape has been undergoing constant transformation due to disruptive technologies, intensive competition, environmental concerns, and above all stakeholders’ expectations. Further, Covid-19 and its new variant Omicron have brought rapid changes to the entire canvas of organisations.

As a result, once-strong companies are struggling to survive.

By advancing the work of Karl Marx, Schumpeter (1942) advocated creative destruction, a theory based on business cycles and economic innovations i.e., ceaseless industrial mutation that destroys the old economic order and creates a new one based on ‘survival of the fittest’ criteria.

Subsequently, Richard Foster (2012) of Yale University concluded that the average lifespan of a company listed on the S&P 500 index of leading US companies declined to 15 years in 2012 from 67 years in 1920s. Therefore, it is worthwhile to ruminate on the key elements of business strategy that make the organisations live through generations in the Indian context.

Time management

Time management is an essential component of success of any organisation. Customers in the 21st Century prefer any product or service, if they get the same ‘just-in-time’. For instance, IndiGo identified this business opportunity and mastered the art of time management in the Indian aviation industry, which is reflected in its market share (53.5 per cent) as of October 2021.

Similarly, cost leadership is the mantra of market share and sutra of success in the fiercely competitive business world. Further, time and cost variables are interlinked and when there is time overrun in execution of any project, cost overrun invariably happens due to inflation. Under the astute leadership of E Sreedharan, Konkan Railway and Delhi Metro – infrastructure projects in public sector -- were completed in record time and without any cost overruns; remarkable achievements by any standards.

Quality factor

Customers are willing to pay the premium if the goods supplied and services rendered to them are of superior quality. Amul is a household brand in India due to its quality assurance on its milk products. In fact, ‘value for money’ perceived by the discerning customers depends on quality as well as durability of the product.

i

Michael Porter (1985) propounded that firms should attain cost leadership, differentiation and focus as part of the business strategy to gain competitive advantage over their competitors. Thus, organisations can sustain market leadership by focusing on their core competencies and positioning themselves properly in a competitive business setting.

Technology factor

Lifespan of corporates has been shrinking mainly due to evolution of technology, advanced processes, and innovative solutions. Gramophone, Kodak, Nokia, etc. became extinct primarily due to technological advancements. Electric vehicles, smart phones, and drones are classic examples of creative destruction. Similarly, Thermax played a key role in the country’s energy shifts -- from coal to biomass, to waste heat, to solar power thereby contributing to energy security of India.

Environment first

Keeping in view of triple bottom-line: Planet, People and Profits, the modern-day organisations can’t afford to ignore the environmental damage occurred on account of their operations. As part of its clean and green initiatives, Tata Steel developed Dalma view point with over 1,000 plants, 28,000 creepers, 5,000 shrubs, and 13,000 Sq. meters of grass to reduce the ill-effects of pollution caused by its factories in Jamshedpur.

Sang Jun Cho et al. (2019) found a positive relationship between a firm's financial performance and its policies on corporate social responsibility. For example, HDFC Bank spent an amount of ₹444 crore during 2017-18 towards imparting training to 7.6 lakh Self Help Group women, building or renovating 7,000 sanitary facilities in schools, supplying 21,000 renewable energy units, and collecting one million units of blood to save lives and livelihoods.

Available literature suggests that corporate governance has a significant statistical relationship with firm performance measured through return on investment (Abatecola et al., 2012). Essentially, corporate governance is ‘applied ethical behaviour’ of any firm. By internalising good governance into the DNA of the organisation, expectations of all stakeholders will be largely fulfilled.

Here, Sundaram Fasteners Limited (SFL), a company manufacturing automotive products, is a case in point. Ever since its inception in 1962, SFL has not lost a single working hour due to labour unrest mainly due to its open work culture/constant dialogue between the top management and workers. In fact, SFL is the first ever Indian engineering company that set up a manufacturing plant in China.

The way forward

By incorporating the above mentioned key elements in their business strategy, companies will reap the benefits such as high performance in the stock market, continuous patronage from the customers, most preferred employer in the job market, most sought after organisation by the suppliers, most admired firm by the society and foster ‘ease of doing business’ in its overall operating environment.

An organisation becomes a world-class institution and can withstand the test of times by constantly understanding the stakeholders and community perspectives. To achieve this, organisations need to be process-oriented rather than relationship-oriented. The key managerial personnel have to incessantly identify ‘blind spots’ in the operational spectrum of the organization.

Business organisations are like human beings and have limited lifespans. An organisation’s lifespan will be longer if it implements ESG (environment, social and governance) framework in its operational domain, upgrade its technology persistently, and maintains competitive advantages: time, cost and quality. Put it differently, the firms need to eternally re-invent themselves by improving their products, processes, and services in search of excellence. In this process, good companies can become great companies.

+++

Srikanth is Associate Professor and Director (Finance), DDU-GKY, National Institute of Rural Development and Panchayati Raj, Hyderabad, and Prasad is former Assistant General Manager, SBI. Views expressed are personal.

Published on January 17, 2022
COMMENTS
This article is closed for comments.
Please Email the Editor

You May Also Like

Recommended for you