S Murlidharan

The al-Qaeda style of management

Updated on: May 11, 2011
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Reducing profit centre heads to the role of executioners of al-Qaeda can never be edifying to their egos and creativity.

Centralisation of decisions and decentralisation of execution may not be the blurb in any al- Qaeda literature, but is the stern implicit, immutable message to its adherents as indeed is the message to the henchmen of any radical or terrorist organisation from the high command consisting of the founder and his coterie.

Centralisation is the distinguishing feature of any authoritarian set-up — be it autocracy or communism. All decisions, strategic or other, small or big, are taken by the high command, with regional chieftains only having the power to execute the decisions.

In the rarefied corporate world too, true democracy is followed more in breach than in compliance. Indeed there is a palpable hesitation to take the shareholders into confidence. Directors are handpicked by promoters and voted in.

The optional regime for voting in of directors through the proportional representation system or through the single transferable vote has never been made use of in India; so much so there is hardly any contest for the office of directorship.

Shareholders' agreement

The Britons might have in the recent referendum given thumbs down to the alternative voting system consisting in single transferable vote that seeks to ensure that the winner has the confidence of at least 51 per cent of the electorate but that does not mean the extant first-past-the-post system that is followed in many countries including India is democratic, reflecting the will of the majority.

If anything, often it doesn't. In the corporate world, money power translates into voting power much more than in the world of politics. Those bringing in dollops of capital or technology safeguard their interests through a private agreement with the promoter quaintly and inappropriately called shareholders' agreement.

Power of bulk vote

Every organisation during its infancy swears by the noble tenets of text book management principles. Delegation of authority which is practised religiously as a fad soon fizzles out into a buzzword, with the promoters and his coterie weighing down inexorably on the profit centre heads and regional chieftains.

To be sure, professional management is professed, encouraged and tom-tommed but when it comes to the crunch, it is the power of bulk vote that counts.

Small wonder, profit centre heads sooner or later yearn for their own fiefs and either start their own outfits or demand and get a mini-empire carved out of the behemoth. The upcoming demerger of Larsen and Toubro is more to assuage and placate the numerous profit centre heads than for reaping the advantages of core competence.

Parallel power centre

Text books and pristine management gurus envisage strategic planning and control role for the board of directors, thus making for a good deal of delegated authority to profit centre heads and regional managers; but over the years the boards have become more intrusive thus reducing profit centre heads to figure heads if not puppets.

The accent on centralised financial management with its obvious advantages has in a way involuntarily supplied the impetus for centralisation, al-Qaeda like, of the entire management in the hands of the board of directors.

And in CEO-driven companies, the CEO's office becomes a parallel power centre rivaling the board of directors.

No morale-bosster

Profit centre heads recoil at being dictated and having to look over their shoulders. In a holding company set-up, the boards of individual companies squirm uncomfortably because the reins of control are with the holding company which is more worried about the fortunes of the group companies rather than about profit centres.

While centralised planning (read strategic planning) is undoubtedly desirable, reducing profit centre heads to the role of executioners of al-Qaeda can never be edifying to their egos and creativity.

Nobody has raised a banner of revolt against lack of grassroots democracy in corporates.

This perhaps has got something to do with the rather fatalistic assumption that those contributing to the equity of the company have to suffer in silence, especially if they bring a minuscule capital to the coffers of the company.

Stomping out or voting with the feet, smacking of self-flagellation, to bring the scrip down in the bourses have had a chastening effect only if happens en masse, and that too only on promoters mindful of market reactions.

There is also another dawning realisation that while citizens have the right to shape their destiny, small shareholders have no right to shape the destiny of the companies they are shareholders of and must concentrate on pursuing their economic rights alone.

But even this they can pursue only if they are fleet-footed and devoid of any sense of cloying loyalty.

(The author is a Delhi-based chartered accountant.)

Published on May 17, 2011

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