Indian companies must avoid the errors in the West's models for managing services
The last few centuries have seen the Western economies record phenomenal growth even as India slid from being the largest contributor to world GDP in 1500 to accounting for a fraction of one per cent in 1947. By the time the Industrial Revolution peaked in the 19th century, Western business enterprises had become the undisputed leaders in the production, distribution and marketing of products. Mass production, automation and computerisation were the internal strengths on which success was built.
An Indian born and brought up in an impoverished country could not be faulted for assuming that the only way to succeed was to follow Western ways. Corporate India led the drift Westwards. Along the way, we appear to have lost the self-confidence to create and use home-grown approaches to the management of organisations – and economies – without discarding the strengths of Western models.
Today, from sartorial inelegance to the use of jargon like “verticals”, “domains”, “metrics”, “talent management” and “CSR”, and the blind adoption of practices like outsourcing customer contact, “pay-for-performance” and “downsizing”, corporate India has become a sorry image of the Western model. All this copying might not have been bad had there been any evidence that the Western model was working. On the contrary, there is enough evidence to suggest that it is coming apart at the seams, especially in the context of a service economy. Let us examine the evidence.
Meryl Streep’s Oscar-winning portrayal of Margaret Thatcher brought to mind the first of the many actions that gave the former British prime minister the sobriquet of “iron lady”. Soon after she became prime minister, Thatcher took on the power of the coal miners’ union and, following a battle that lasted almost a year, won. Among the trump cards she held was that of a piled-up inventory of coal to feed the market. The unions were powerless, since their strike failed to hurt the customers.
She could not have done that if she was forced to fight unions representing workmen in the service industry — for the simple fact that there are no inventories for service. The mere suspicion that an airline workers’ union is likely to strike will lead to mass cancellation of bookings. A few years ago, British Airways suffered losses amounting to over £1 billion due to a strike started by just 1,500 employees of their outsourced food supplier.
France’s transport workers have understood the power they have to bring the country down to its knees. Every time a major event is scheduled in France, like the football World Cup, easy money can be made by anyone who wishes to bet that the transport workers’ union will make outrageous demands and threaten strikes in the week or so prior to the major event. The fact that in the last decade all major US airlines barring Southwest have filed for bankruptcy and sought the restructuring route to reduce employee numbers and wages should raise alarm bells. The Apollo hospital in Chennai obviously did not hear those bells, and it had to cave in to union demands in a hurry earlier this year.
While there are many virtues we should learn from the West – like punctuality and public hygiene – there is one glaring failure of theirs we will do well not to emulate: their collective blindness that makes them deal with employees as disposable commodities. Long before this leads to confrontational relations with unions, this attitude results in loss of employee loyalty and commitment, with a consequent adverse impact on customer satisfaction and profitability.
Here is an example to explain this point further. From 1994 till 2000, I was closely involved in the turnaround of a large UK company, Anglian Water. It not only climbed the rankings on the customer satisfaction scale to become number one by 2000, but also become more profitable.
Towards the end of 2000, I was facilitating a two-day programme for the company’s finance division, whose service to their internal customers had been rated low. The evening of the first day found me in the dumps, for I felt I had made little or no impact on the participants that day. One of them relieved me partly from this feeling of inadequacy by informing me that on the previous day, the new top management had announced that the finance function was going to be downsized to 50 per cent within the next six months. The friendly native who shared this information with me said, “When all of us know that there is a 50 per cent chance that we will leave this organisation within six months, are you surprised we don’t give a damn about things like customer satisfaction?”
Within a short period, this great company had slid down the ranks on customer satisfaction, had gone through a complete overhaul of top management and was being run more by financiers in the City of London than by domain experts in utility management. The example I have given is not an exception but the rule in the West.
Against this backdrop, let us revisit what happened on November 26, 2008, when terrorists attacked what has become the symbol of Indian hospitality — the legendary Taj Mahal Hotel adjacent to the Gateway of India in Mumbai. In the weeks following this tragedy, news emerged of the valiant efforts taken by the Taj employees to safeguard their guests, with quite a few employees actually giving up their lives while doing so. Good employee relations built over a century in the traditional, Tata style were the root cause of outstanding acts of loyalty and courage on the part of the Taj employees.
What does this mean for Indian management in an economy already dominated by services? Follow the Tata model rather than the Western model, so that employees feel they are truly valued as the most important asset by their management. Only then can an organisation achieve sustained success in the service industry.
As an endnote, a suggestion for the finance minister: give back 50 per cent of the additional two per cent service tax to organisations that complete an accounting year with zero days lost due to industrial strife.
The writer, a former corporate executive, was the founder-director of the Centre for Service Management at the University of Buckingham, and is now MD of Chennai-based VSM Consulting Services.
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