Often mergers fail due to cultural conflict. To fare better at deals, businesses can borrow a few lessons from the world of bees, suggests Michael O'Malley in ‘ The Wisdom of Bees ' ( www.penguin.com ). “Bees are able to do what seems difficult for us: enlarge their circle of friends and incorporate outsiders into the in-group. This, however, requires the assistance of a neutral third party – the beekeeper,” he adds.
What does the beekeeper do? He places comb from one hive into the receiver hive prior to introducing the bees themselves, or uses other procedures in which the scents from the two hives are gradually spread before the bees from the respective hives make physical contact, explains the author. That way, the receiver colony acquires a new chemical signature that reflects the odour of both colonies, and the new template allows the colony to accept bees from the donor hive and the donor bees to accept the presence of bees from the receiver hive, one learns. The insight O'Malley draws from bees is that mutual acceptance requires mutual offerings, or reciprocity. Not too differently, a smooth merger, as he notes, entails recognition by the acquiring company that it is partly dependent on the acquired company for the future success of the new, combined organisation. Instructive read.
Costs of poor quality
In traditional financial reporting, the costs of poor quality are not reported or highlighted separately, rues Tapan K. Bose in ‘ Total Quality of Management ' ( www.pearsoned.co.in ). These costs – which arise due to wastes, sporadic fire-fighting, correcting mistakes or policing them – get absorbed or remain hidden within the overall cost of operations, he explains. He differentiates the costs of poor quality from the investments for building quality into products, as for example, the cost of design, and the investments on processes, facilities, manpower, measuring instruments and so forth to attain the target quality that will sell. “Over time, such expenses take the form of ‘investment', are easily identifiable, and can be accounted for by the traditional accounting system.” An alarming estimate cited in the book is that the price of non-conformance (in the form of costs of correcting the product or service, and payments for warranty claims) can represent 20 per cent or more of sales in manufacturing companies and 35 per cent of operating costs in service companies; in contrast, the price of conformance (comprising most of the professional quality functions, all prevention efforts, and quality education) may represent about 3 to 4 per cent of sales in a well-run company. Recommended study for the quality-conscious.
A mark of respect to the wife
Mehr, a quranic right, is an economic safeguard, writes Flavia Agnes in ‘ Family Law – Volume 1: Family Laws and Constitutional Claims ' ( www.oup.com ). She adds that it is a mark of respect to the wife and is meant to set off the disability suffered by women under the law of inheritance. “While as per Hanafi law, a minimum of ten dirhams is mandatory, legal texts routinely mention amounts of one thousand and two thousand dirhams by way of examples which indicate that the amounts settled were meant to be far above the lowest stipulated.”
The author cites theorists for the view that mehr forms the consideration in the contract of nikah, and that the Prophet converted the custom of bride price of tribal Arabia to mehr which would be a future security to a married woman. Noting that the stipulation of mehr at the time of marriage is an integral part of a Muslim marriage, Agnes mentions two methods, viz. prompt (Mu'ajjal) and deferred (Mu'wajjal). possession of her deceased husband's property, the author informs. In this context, the book discusses some of the earliest instances of legal enforcement of monetary claims, such as the Badarannissa Bibi's case, decided by the Calcutta High Court in 1871.
Challenges in microfinance
It was at 36 per cent rate of interest that SKS began lending, reminisces Vikram Akula in ‘ A Fistful of Rice ' ( Harvard ). Conceding that it sounds incredibly high compared to Western loan rates of 10 to 12 per cent, he reasons that there was no other option, given the very different circumstances surrounding loans to the poor. Foremost in the list of differences is the cost of servicing. “In the West, your banker doesn't come to you each week to collect your loan payment face-to-face. But SKS loan officers travelled to every village, every week, to sit with the women and collect their payments.” Second, at say 10 per cent interest, it would not be financially feasible to even cover the cost of fuel to get the loan officer to the villages, given the average size of the loans, adds Akula. To those who wonder if it was ever possible for a borrower to run a business despite paying 36 per cent interest, it can be enlightening to learn from him that the average profit margin of the micro-business borrowers was 50 per cent!
The alternative source of financing, viz. the moneylender, was at an exorbitant rate of 4 per cent a month, and at times as much as 10 per cent, working out to an annual percentage rate of 48 to 120 per cent, the author notes. “At such rates, anyone who fell behind on a payment could never expect to catch up – even just a couple of months in, your interest burden would already be so high that you'd simply enter an endless debt spiral.”