CFO India - September 2010 by Bhupinder Sharma

VIBHA PADALKAR AN IPO ADDICT WITH A SEVEN-YEAR-ITCH P. 22

TALENT HUNT STRATEGIES TO RETAIN KEY PEOPLE p. 36

ALL THAT JAZZ THE HONDA GETS JAZZIER p. 50

VOLUME 01 ISSUE 10 Rs.50 SEPTEMBER 2010

CFO INDIA CFO PROFILE : VIBHA PADALKAR 22 | TALENT HUNT 36 | ALL THAT JAZZ 50

BOOMING

ECONOMY

VOLUME

ISSUE

WORRYING TIMES!

HOW CFOs ARE MANAGING GROWTH IN THE FACE OF INFLATION AND A CASH CRUNCH - pg 12

A 9.9 MEDIA PUBLICATION

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Vibha Padalkar ensured HDFC Standard Life Insurance minimised losses during the turbulent 18 months of the economic downturn.

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Worrying times! Liquidity crunch and inflation are two downsides to the double-digit growth CFOs have to deal with. Will it be tackled?

&,/*$/'(60 42 BLEND IT LIKE BARISTA Rajesh Sharma talks (over a cup of coffee) about his biggest challenge till date as Barista Lavazza‘s CFO

"+/"#7' 30 GOOD BOSSES TUNE INTO STAFF Know how to project power since those you lead need to believe you have it for it to be effective.

"$'7"+8 !"#$%"&'()* IS THE CFO READY FOR GROWTH?18 A poll conducted on 120 CFOs across India shows most feel cost rationalisation is imperative

"+$%),&'"&* HONING A TALENT FOR RETAINING TALENT 36 Smart CFOs understand the real cost of losing talented people during a recession and having to recruit them again

MAKING THE TWAIN MEET 26

A CIMA research on corporate governance looks at how governance styles from the east and west can be merged to evolve a new best practices solution

10 KISHORE SALETORE CFO, Tata Realty & Infrastructure Ltd talks about the new IFRS norms and challenges

)*#(5,)/ 03 EDITORIAL 04 LETTERS TO THE EDITOR

VIBHA PADALKAR AN IPO ADDICT WITH SEVEN-YEAR -ITCH P. 22 A

TALENT HUNT STRATEGIES KEY PEOPLE TO RETAIN p. 36

ALL THAT THE HONDAJAZZ JAZZIER p. GETS

CFO I NDIA

06 O-ZONE

VOLUME 01 ISSUE 10 Rs.50 SEPTEMBER

2010

CFO PROFILE : VIBHA PADALKAR 22 | TALENT HUNT 36 | ALL THAT JAZZ 50

BOOMING

VOLUME

ONOMY WORRY IN TIMESG!

COVER DESIGN SRISTI MAURYA

HOW CFOs ARE MANAGING IN THE FACE OF INFLATION AND A CASH CRUNCH pg- 12

GROWTH

A 9. 9 MEDIA

PUBLICATION

AD INDEX

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MANAGING DIRECTOR: Dr. Pramath Raj Sinha

Growing Pangs

THESE ARE THE BEST of times. And while these are not quite the worst of times, India Inc. is not as buoyant about the stories of 9% growth rates that the government is flaunting. Make no mistake: companies are still bullish on growth. But the worry lines too are showing. To begin with it seems banks are reluctant to loan large amounts to corporations, resulting in low cash reserves for many firms. And if the liquidity crunch is bad news then the slower-thanexpected recovery of the European and American markets coupled with rising inflation and an upward pressure on wages back home, have made life that much more difficult for the CFO and the entire top management as margins dip and issues of productivity and fixed costs crop up. But while these developments have been well documented in the media, we have gone a step further and actually asked economists, bankers and CFOs across the country what they think companies in general and the CFO in particular can and should do to maintain and improve their firm’s growth curve under the circumstances. The cover story and an accompanying survey where we spoke to 120 CFOs across India, have both attempted to find answers to this question. In other sections we talk to coffee chain Barista-Lavazza’s CFO Rajesh Sharma about how he tackled the delicate problem of blending two cultures after the acquisition of Barista by the Italian coffee makers and get Vibha Padalkar, the energetic CFO of HDFC Standard Life Ltd to tell us why leading IPOs and seeing the world are her biggest thrills in life. There’s something for everyone in this issue in fact. If your firm has seen consistently high attrition rates, the article on ‘why good bosses tune in to their people’ is a must read. And if a tricky M&A is what’s keeping you awake, the feature on incorporating best practices from the east and west to develop a new model of corporate governance will surely provide food for thought. Enough of the serious stuff. I am certain that even after gruelling 12-hour workdays, CXOs still have time to have a little fun – do stuff like go on a family vacation, flaunt the latest gadget or buy that hot new sports car. Turn to the Lounge section to get behind the wheels of the latest toy from the Honda stable, plan your holiday in the hills or buy that new qwerty phone!

EDITORIAL EDITOR: Anuradha Das Mathur MANAGING EDITOR: Dhiman Chattopadhyay ASSISTANT EDITOR: Anoop Chugh CONTRIBUTING EDITOR: Bennett Voyles DESIGN SENIOR CREATIVE DIRECTOR: Jayan K Narayanan ART DIRECTOR: Binesh Sreedharan ASSOCIATE ART DIRECTOR: Anil VK MANAGER DESIGN: Chander Shekhar SENIOR VISUALISERS: PC Anoop, Santosh Kushwaha SR GRAPHIC DESIGNER: Suresh Kumar SENIOR DESIGNERS: TR Prasanth & Anil T, Joffy Jose & Anoop Verma DESIGNER: SRISTI MAURYA CHIEF PHOTOGRAPHER: Subhojit Paul PHOTOGRAPHER: Jiten Gandhi THE CFO INSTITUTE EXECUTIVE DIRECTOR: Deepak Garg NATIONAL HEAD: Bindu Krishna MANAGER: Shreya Pilani ASSOCIATE: Priyam Mahajan SALES & MARKETING V-P SALES & MARKETING: Naveen Chand Singh NATIONAL MANAGER (SALES): Pranav Saran (+91-9312685289) NATIONAL MANAGER (EVENTS & SPECIAL PROJECTS): Mahantesh Godi (+91-9680436623) NATIONAL MANAGER (ONLINE): Nitin Walia (+91-9811772466) ASSISTANT BRAND MANAGER: Arpita Ganguli CO-ORDINATOR (AD SALES, MIS, SCHEDULING): Aatish Mohite SOUTH: Vinodh Kaliappan (+91-9740714817) WEST: Sachin N Mhashilkar (+91-9920348755) PRODUCTION & LOGISTICS SENIOR GENERAL MANAGER (OPERATIONS): Shivshankar M Hiremath PRODUCTION EXECUTIVE: Vilas Mhatre LOGISTICS: MP Singh, Mohamed Ansari, Shashi Shekhar Singh OFFICE ADDRESS Nine Dot Nine Interactive Pvt Ltd Kakson House, A & B Wing, 2nd Floor 80 Sion Trombay Road, Chembur, Mumbai- 400071 INDIA. Published, Printed and Owned by Nine Dot Nine Interactive Pvt Ltd. Published and printed on their behalf by Kanak Ghosh. Published at Bunglow No. 725, Sector - 1, Shirvane, Nerul, Navi Mumbai - 400706 Printed at Silver point Press Pvt Ltd, D107, MIDC, TTC Industrial Area, Nerul, Mumbai 400706.

Copyright, All rights reserved: Reproduction in whole or in part without written permission from Nine Dot Nine Interactive Pvt Ltd is prohibited. SUBSCRIBER SERVICES: Call +91-11-45069999 VISIT CFO INDIA’S WEBSITE www.cfo-india.in

SEPTEMBER 2010

CFO INDIA

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No covering up!

CFOs are slowly but surely becoming an integral part of the top management even in family-run businesses. Your cover story (Changing their spots) depicts the transition of CFOs and such companies to a new level of professionalism. When the entire world is looking at better corporate governance to rule out any possibility of fraud the CFOs’ role has become all the more important. I wish the cover design was a little more thoughtful though, than mere computer-generated graphic. Randeep Singh Sodhi, New Delhi

09.10 CASE STUDY The CFO India magazine sometimes reminds me of my MBA days at SP Jain Institute (Mumbai). After the inclusion of the case study segment, it’s almost like a textbook or a reference book for me. For a finance working professional who aspires to be a CFO someday, the magazine is a godsend and helps me keep track of developments in the field. — Harsh Suri, Pune

FAMILY BUSINESS ‘The five attributes of enduring family businesses’ was a real insightful article. I second your thought that a family business must meet two intertwined challenges – achieving strong business performance and keeping the family committed to and capable of carrying on as owners. I guess these two challenges are instrumental to any family-run business. — Roshini Chadha, student, ICFAI

THE ‘NEW’ CFO! The new-look CFO is a treat for the eyes. The aesthetic design and expressive writing make the

Your voice can make a change: Share your view point on what’s happening in the community and your feedback on the magazine at cfofeedback@9dot9.in

magazine a must read for today’s CFO. I absolutely loved the re-jigged Lounge section. Now, the magazine doesn’t merely have good content but diverse content as well. The addition of car-reviews is of good practical use for readers. True, what use is money, if you can’t splurge! — Bhaskar Das, Kolkata

MORE ROOM FOR BOOKS I believe book reviews are a brilliant idea to break away from the finance monotony. But, shouldn’t book reviews deserve a little more space than what it gets currently? Pardon me, I am a voracious reader and currently have half-a-library at home; so I thought I shall raise my concern. — Kapil Sachdev, Mumbai

WANT-TO-BE CFOS It’is great to see the inclusion of new sections in the magazine. As a finance executive with a bank I am wondering if there is some space for want-to-be CFOs in the magazine. A place where mid-level executives could talk about their dreams, or could come up with ideas which they would want to implement one day. It would be a great read to know what the new-generation finance executives are made up of. — Nitin Gupta, Bengaluru

SEPTEMBER 2010

CFO INDIA

Fresh repo rate hike worries bankers.

THE BANKING INDUSTRY is mulling hiking deposit rates after the Reserve Bank of India (RBI) raised interest rates more aggressively than expected on September 16, keeping up its fight against inflation that is slowly easing but still well above its comfort level. The apex bank lifted the repo rate, at which it lends to banks, by 25 basis points to 6 percent and raised the reverse repo rate, used to absorb excess cash, by 50 basis points to 5 percent. Top bankers across India reacted in much the same way to the hike, predicting a small raise in deposit rates but stating at the same time that the banking industry is in no hurry to pass on this hike to consumers. 6

CFO INDIA

SEPTEMBER 2010

In an interview to Reuters, B A Prabhakar, executive director, Bank of India said: “We might consider passing on this hike, but we have to work it out. We don’t see any immediate impact on banks. But certainly, the expectations from depositors will go up, so they would expect us to raise deposit rates by at least 25 basis points.” Agreed Albert Tauro, CMD of Vijaya Bank. “The signal is there that rates are going to be hiked, but I don’t think the banking industry will hike it in a hurry, because this is a quarter-end. It may remain broadly at the same rate till September 30. There could be definitely some upward revision in lending rates and deposit rates, minimum by 25 basis points,” he said. Corporate India is already trying to come to terms with a liquidity crunch, with banks tightening loan norms. Having to pay higher interest rates could well affect many of their plans for growth and expansion. As Ramesh Iyer, MD of Mahindra Finance admitted, he expects things to change. “I guess borrowing cost will go up. We will have to see what kind of impact it will bring to our own borrowing pattern. In my experience what we will see now is the lending rate going up at the retail end. We will definitely also look at passing on some cost to the customers, but we would wait for the response of the banks, if only to see to what extent they are passing on

PHOTOS.COM

09.10 !"#$%#&'

()*+

RESULT

Will the hike in US visa fees affect not just jobs but profit margins of Indian IT firms?

50% Yes 04% Maybe 46% No

CURRENT POLL QUESTION

Should CSR activity be made mandatory for companies across India? 2*4,$+*5$64$555789*:+;4:4<4,78*=>?*@@

-./0#!1!12#$#'3#

IS INDIA LOSING IT? WHY DID INDIA SLIP two notches in the recent Global Competitive Index (GCI) despite being one of the fastest economies to emerge from the shadows of the economic crisis? The reasons sound somewhat similar to those being cited for the mess that surrounds the Commonwealth Games: poor infrastructure, corruption in the corridors of power, poor health facilities and continued lack of good education. So even as emerging markets in Asia showed impressive gains in global business competitiveness in 2010, India slipped to the 51st position (from 49 in 2009). The good news: despite the COUNTRY RANK IN 2009 fall, growth prospects remain RANK IN 2010 CHANGE robust, with predictions of up to 10% growth for the economy in 2010-11. Of course 1 1 0 2010 so far has also seen Switzerland 2 4 -2 improvement in the size of US 49 51 -2 the Indian market. However, India 29 27 +2 with communicable diseases China 56 58 -2 and infant mortality rates still Brazil 76 62 +17 not under control and poor Sri Lanka 75 59 +16 roads adding to our problems, Vietnam development is still lopsided. “Policy makers are struggling with ways of managing the present economic challenges, while preparing their economies to perform well in a future economic landscape characterised by uncertainty and shifting balances. It is more important than ever for countries to put into place the fundamentals underpinning economic growth and development,” says Klaus Schwab, executive chairman of the World Economic Forum which conducted the survey. The bottom line - while the country continues to take rapid strides at the top with India Inc. expanding its footprints globally, somewhere down below, all is not well. Time for some serious thinking on the CSR front? Change

the burden to others,” he added. Companies feel the RBI could have delayed the hike, keeping in mind the high inflation. “With economic recovery shrouded in uncertainty, central banks of nations such as South Korea, Australia, Philippines and Malaysia have put on hold the hike in policy rates. Considering the four consecutive hikes in the recent past, moderation of growth in the industrial sector and pressure on liquidity, a pause in hiking the interest rate could have helped accelerate the growth momentum,” said Seshagiri Rao, joint managing director at JSW Steel. Across India Inc. many agreed with Rao’s views. “It would eventually lead to increased cost of borrowing both for corporate and retail sectors,” felt V G Raghavan, group CFO, Essar Group. That the aggressive nature of the hike did come as a surprise was evident when J.P. Dua, CMD of Allahabad Bank summed up the situation by saying, “the whole thing has come about because of inflation. The worry about inflation is there with RBI. But we never expected a 50 basis point hike.” The only solace perhaps is that fixed deposits will now give better returns. Also real returns (actual returns minus inflation) are set to enter positive territory for the first time in over 5 months. Most industry players also played down the fear that rising interest rates would lead to an adverse impact on their profit margins and hoped that economic growth and consumer spending will continue to fill their coffers.

THE CFO POLL

2010

Anup Khosla cfobook .......................................... Pg 08 IPO Dhamaka ...................................................... Pg 08 Algae Power..........................................................Pg 09 Smoked Out .........................................................Pg 09

2009

*+, WHAT’S AROUND ZONE

SEPTEMBER 2010

CFO INDIA

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Anup Khosla Wall

Info

Boxes

What’s on your mind? Attach

Share Anup Khosla believes Help Age India is dedicated to the cause of empowering senior citizens to take decisions pertaining to their own lives. June 15 at 1:40pm · Comment · Like

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Born on: 10 March 1952 Married to: Neel Khosla Religious Views: Secular Political Views: Reformist

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MBA Cranfield University ICAEW

Anup Khosla testifies NGOs in India are doing a great job sans a few black sheep. June 15 at 1:40pm · 5 people Commented · Like

Anup Khosla demands further transparency of the accounts by NGOs June 15 at 1:40pm · Comment · 2 people Like this

I Read...

E.DF CFO, Help Age India (Non-Profit Organisation Management industry) May 2003 — Present (7 years 5 months)

Imagining India: Nandan Nilekani August 05 at 1:35pm · Comment · 3 people Like this

I Listen...

Beatles, The WHO (band) September 05 at 1:55 pm · Comment · 5 people Like this

GROUP CFO The Chaddha Group (Wine and Spirits industry) April 2002 — September 2002

Group Financial Controller Maharaja Organisation (Consumer Services industry) 2001 — 2002 (1 year ) more...

RECENT ACTIVITY Anup Khosla likes CFO India and 7 others

Anup Khosla likes Olive Kitchen, London, ET, Fortune, India Today June 15 at 1:40pm · Comment · 2 people Like this

THE DEFINITION: Inside tall buildings with bad connections, ‘phone shui’ is the art of adjusting the placement of your cellphone to find a proper signal. The term is derived from the popular Chinese belief of feng shui. THE USAGE: Now you know what your younger colleague from the IT department meant when he said: “Excuse me, I have to stand near the window. My phone needs some phone shui.”

FUNDING

IPO Dhamaka VENTURE CAPITALIST-BACKED IPO s are set to raise $1bn this year, says a recent Venture Intelligence survey. Since January, six VCbacked companies alone have raised $615 million in IPOs in India and abroad. At least five more are likely to raise over $400 million by December. The largest gainers are SKS Micro Finance, Jubilant Foodworks and MakeMyTrip.com. And who are the angels in disguise? The VC investors who are throwing big money include the likes of Sequoia Capital, Helion Ventures, JP Morgan and Intel Capital among others. “We are seeing the first wave of companies that have reached significant scale over the past five years, now ready for events like an IPO,” Kanwal Singh, MD Helion Venture Partners, told the Economic Times.

CFO INDIA

SEPTEMBER 2010

BACKED BY INCREASED VC FUNDING A FEW SUCCESSFUL STARTUPS ARE NOW SCALING UP OPERATIONS

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INSTANT GOOGLE!

Colour of Money ON SEPTEMBER 8 at the San Francisco Museum of Modern Art, Google finally took the wraps off its latest software product. The Google Instant service basically means that Google no longer waits for you to hit Enter while searching and starts updating its results page instantly as you type. Google describes it as a fundamental shift in search. Google Instant will be available for mobile as well, by December 2010. The UK, France, Germany, Italy, Russia, Spain and the US are the first countries to benefit from this new hotness, while Chrome, Firefox and Internet Explorer 8 are the first sup-

ported browsers. Instant is expected to hit Indian shores by year-end. So how does it work? Click “w” and you get local weather results instantaneously. Google’s also integrated a predictive algorithm into Instant, which it describes as a “psychic element ... in that the site is able to predict what you’re going to type. Google starts the search before you type.” Scroll to search is another touted feature, whereby going up or down through the suggested drop box searches also automatically updates your results in line with the suggestion you’ve got highlighted.

#A21D.A/#A!

Algae Power INDIA’S SEARCH FOR cheaper, cleaner fuel to provide power to millions who still literally live in darkness could lead them all to Puerto Rico. The tiny Latin American nation will soon have a plant that will generate clean fuel from tropical marine micro-algae. The algae-based bio-fuel plant built in northern Puerto Rico by the Bio-Lipidos company and stateowned utility AEE will provide electricity to the nation. According to Miguel Cordero, AEE’s executive director, about $10 million will be invested to get the plant into operation. “We have the knowledge and the technicians, but the will to do it was lacking,” said Cordero. Company officials said they wanted to produce more than 1.6 million gallons of vegetable oil in the first year of operation and what remains on the outside, the dry bodies of the micro-algae, will be used as animal feed as part of a project to farm shrimp and organic tilapia. The bio-degradable fuel produced from marine micro-algae is clean and non-toxic, having an energy content similar to that of diesel.

A recent Assocham-PTI survey has found that of the Rs 105 lakh crore investment proposals in 20 states in 2010, five states – Gujarat, Orissa, Maharashtra, Andhra Pradesh and Karnataka alone accounted for 52% of the money. Gujarat topped this list by attracting proposals worth Rs 12 lakh crore or 11.43% of the total. These five states incidentally have consistently attracted high investments over the last decade and more.

Dell eyes SMB market IT major Dell is making rapid strides in the Indian market. After becoming the number one PC brand (desktops and laptops combined) in the country, for the first time in Q2 2010, Dell has now set its eyes on the small and medium business (SMB) segment. Dell is now launching the second phase of its SMB campaign where it will set up 600 service outlets across India.

Smoked Out

If you like to puff away during office hours, the Rajkot People’s Co-operative Bank has no job for you. The bank does not hire anyone who smokes or chews tobacco. And, customers with these habits will have to pay higher interest if availing a loan! “A person who does not have these bad habits performs better than those who are addicted,” says Shamjibhai Khut, chairman. Surely a point to ponder.

SEPTEMBER 2010

CFO INDIA

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Facts & Trivia EDUCATION: Chartered Accountant MBA from IIM-Bangalore SCHOOL: St Lawrence High School FIRST JOB: ITC Ltd as manager finance PASSIONS: Music, travelling FAVOURITE MUSICIAN: Pt Bhimsen Joshi

KISHORE SALETORE CFO, TATA REALTY & INFRASTRUCTURE LTD

says the coming of the new IFRS norms and challenges such as how to retain key talent has him thinking hard.

WHILE THE REST OF THE WORLD seems to be recovering from the global financial crisis, CFOs the world over seem to be grappling with their next set of challenges. Here are four favourites which keep me awake at night:

ALPHABET SOUP The biggest headache for me as well as for many CFOs across India is the three-pronged trouble in the shape of IFRS, DTC and GST. I call it the threeheaded-monster. Never have a set of alphabets wrought so much havoc, pain, chaos and utter ruin among the carefully laid plans of CFOs. Each brings with it, a unique, complicated and inter-linked set of issues and problems. Analysing which particular issue or set of issues is likely to have the maximum impact on my business is crucial, and often the answers are elusive. Each issue is complex in itself and demands a significant amount of time. Do we really understand all the issues involved? What strategy should my company’s logistics business adopt, post-GST? What about competition? 10

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SEPTEMBER 2010

Post-IFRS, will my quarterly earnings be deferred? How do I manage shareholder and investor expectations? A hundred questions, few answers. My solution is to start early and plan ahead. Set your milestones and monitor them rigorously.

TEAM BUILDING I have been blessed with a great set of team members. However, often when I am mulling over the day just gone by, I cannot help but ask myself: will my star performers be around in the long-run, or even the medium term? Organisations like ours spend an

“The biggest headache is the three-pronged trouble in the shape of IFRS, DTC and GST. I call it the threeheaded-monster.

incredible amount of time selecting, training and grooming these stars; our duty as CFOs is to nurture their talent and let them lead. While I do my best to offer them challenging assignments and interesting portfolios (compensation is not always the issue), I am still in search of the magic potion which builds and binds winning teams. How do I retain their interest and keep them engaged? How can I spend more time with them to nurture their skills and build their confidence? Honestly, there is no fool-proof answer yet.

TIME MANAGEMENT Another issue that constantly bothers me, more so at present, is: how do I manage my time better? One of the unintended consequences of being the ‘Partner to the CEO’, is the humongous waste of time which CFOs are subjected to by being required to attend meetings. We all have been dragged to those boring meetings when we would rather spend time with the team, studying the business drivers and working on breakthroughs.

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In India, it is often an issue of hierarchy and social standing. Skip the meeting, and you run the risk of upsetting the CEO and colleagues; attend it, and yet another three hours are consigned to the flames! No easy answer, friends, but my golden rule for all meetings – ‘fewer attend-

ees, greater output’. Also, try and follow a ‘no-meeting’ day once a week. And no phone calls before 3 pm, please.

SELF-IMPROVEMENT Finally, that eternal question that all of us ask or at least should be asking our-

selves: am I learning and adding value to myself, both as a professional and an individual? Has my work content improved and been enriched? Have my organisation and I graduated to the next level? For many of us, these will be top-of-mind questions today and tomorrow. SEPTEMBER 2010

CFO INDIA

SRISTI MAURYA

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THIS HAS NOT BEEN A USUAL YEAR FOR INDIA INC. A HIGH RATE OF GROWTH IS ALWAYS HAPPY NEWS. HOWEVER, WITH THE LIQUIDITY CRUNCH, INFLATION AND CONSEQUENT UPWARD PRESSURE ON WAGES, CFOS FEAR AND ECONOMISTS FORETELL TOUGH CHALLENGES AHEAD FOR COMPANIES. HOW WILL THESE BE TACKLED? DHIMAN CHATTOPADHYAY

BOOMING ECONOMY,

TIMES! SEPTEMBER 2010

CFO INDIA

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ibha Padalkar knew she would have to come up with new strategies if she wanted her firm to generate not just revenues but also make the bottomline look good, in the face of what she foresaw over the next three quarters: the prospect of a liquidity crunch, reduced margins and an upward pressure on wages. “The new Insurance Regulatory and Development Authority of India guidelines, coupled with other factors, have ensured that we must do some serious and quick rethinking if we are to stay on top of the game,” confesses the CFO of HDFC Standard Life Insurance Ltd. Padalkar is not the only CFO spending sleepless nights and huddling together with his or her core team, to find a way to keep the money rolling in. Indeed, for the insurance as well as most other sectors – from the booming auto industry to the still-struggling-to-get-back-on-itsfeet IT and real estate sectors - growth is staring everyone in the face. Unfortunately, so is rising inflation (read food prices) and a distinct lack of available money with the RBI ensuring a tightening of loan norms. How India Inc. manages to maintain growth in the face of these challenges will be interesting to watch. And the CFO in particular will determine to a large extent how a company tackles this multi-pronged problem.

!"#$%&'(($)(%*'++%),-.'.$% /01%2345/0'$)%#/.$%(3% )#$1%#,4/0%-$)3,-2$)% &+/6%7,'28+9:%;3*$.$-<% (#$%=>?%#/)%(3%6$%2/-$@ &,+%03(%(3%6$%(#$%0/9)/9@ $-%/01%$0),-$%/1$7,/($% '0.$)(4$0()%/-$%4/1$% '0%A-3*(#%'0'('/('.$):B% — VIBHA PADALKAR, CFO HDFC STANDARD LIFE INSURANCE LTD

&'())*+,*!-.#$-"'*-&.# Padalkar admits that this is a unique year in the sense that the chance to grow rapidly is rather tempting but there are pitfalls ahead for those who don’t have their house in order. “For the insurance industry, there is a close correlation between growth and insurance penetration. A robust growth of over 8 per cent, would mean higher incomes, a third of which would result in savings, of which about 20 per cent could be in insurance products. However, rising prices continue to weigh down on the industry, putting pressure on the bottom line. The CFO thus needs a firm control on his or her resources without stifling the growth opportunities that clearly exist,” she says. Agrees Alok Misra, group CFO of WNS Global, a firm that is listed in the New York Stock Exchange and is heavily export oriented. “As the Indian economy continues to grow unabated it is a great time to be living and working in this country. The bulls are back in form with the Sensex ruling above 18K for a while now. A good, almost great monsoon for the most part and the start of 14

CFO INDIA

SEPTEMBER 2010

the festive season is only adding to the euphoria. However, if we look at the international scene things are far from great. Fears of a double dip recession are writ large on folks everywhere. Europe, with the probable sole exception of Germany, is in no great shape and in the US things are not-too-rosy either. Everyone is so worried of something happening in September-October (remember 15 September 2008?) that it is in danger of becoming a self-fulfilling prophecy. Money is waiting on the sidelines with everyone scared of investing believing that the bottom is soon going to fall out of the markets. Liquidity in stock markets overseas is at an all time low with volumes having dried up,” he sums up. In such a situation, says Misra, export-oriented organisations face a strange dichotomy. While demand, and consequently costs, in India are rising - wages, fuel you name it

&#/*$-!"#$% - clients in overseas markets are looking to reduce costs and rate increases are out of the question. Given this backdrop, he admits it is indeed a challenging time for CFOs as they need to look at new and innovative ways to reduce costs.

UNFETTERED GROWTH: THE PITFALLS At first glance however, the picture is of a resurgent India, with its economy on a firm footing. The Economic Survey released in February 2010 alluded to the possibility that India could grow at double digits in the coming decade. Such optimism is rampant in the private sector as well. Our current savings rate is around 35 per cent of Gross Domestic Product (GDP), a sharp increase of more than 10 percentage points we were used to till 2000. That is good news. But decision makers in the government and the private sector will have to face up to an uncomfortable fact – India has shown a tendency to rapidly overheat whenever economic growth moves beyond 8.5% for a few successive quarters. It happened in 2007 and things look much the same in 2010. Consider the inflation numbers at present. India has had a double digit Wholesale Price Inflation (WPI) since February and growth in prices of manufactured goods has shot up from almost zero in December 2009 to nearly 8 per cent in August as inflation moved beyond food. The macroeconomic review published by the RBI in July shows that Consumer Price Inflation (CPI) is almost twice as much compared to other developing nations. One outcome of this will be an upward pressure on wage costs.

LIQUIDITY: MUCH ADO ABOUT NOTHING? Lack of adequate cash reserves is another big worry for many firms. In a recent report the Nomura Financial Advisory and Securities predicts that a sharp rise in currency circulation will add to the liquidity strain by the second half of the 2010-11 fiscal. “We expect advance tax outflows in mid-

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away of the stimulus package

ity crunch/ low cash reserve

recovery of Western markets

Work with service providers to reduce costs Improve internal productivity through better processes and automation Convert fixed costs into variable costs Boost your cash reserves if possible Look for new mediums to boost sales

SEPTEMBER 2010

CFO INDIA

& &#/*$-!"#$% September and the seasonal increase in currency in circulation will add to the liquidity pressures as we head into H2FY11, offsetting most of the gains from higher government spending,” notes the report. This is contrary to the normal phenomenon when high levels of money circulation eases the liquidity pressure. But given the inflation and the festive season, most Indians are expected to keep large amounts of cash at home. As a banker summed up while speaking to a CFO: “The more the currency is with the people, the less there will be with the banking system.” While arguing that there was no real cause for worry for the corporate sector, C Rangarajan , Chairman, Economic Advisory Council to the PM wrote in the Economic Times recently: “The monetary policy now must contain the price rise within reasonable limits even as support is provided to facilitate growth. If inflation persists at this level, further tightening may be called for.”

WAYS TO MANAGE GROWTH In the coming three quarters therefore, (both CFOs and economists agree on this) companies need to step on the gas to increase volumes in order to sustain growth. Not everyone seems equally worried though. Sachit Jain, executive director of the Rs 4000 core textile manufacturing giant, Vardhaman Group, who also leads the finance team across India, says “conservative” firms like theirs are usually cash rich. “As a rule we believe in having more than adequate cash reserves. One cannot achieve longterm gains unless one takes measures to protect the firm against short term shocks. The lesson is clear: if possible, keep cash reserves, whether as FDs or in whatever form you choose, so that short-term shocks do not hamper your growth plans,” he says. Misra, however, says for many companies, particularly those that are predominantly export-oriented, there is

CFO INDIA

SEPTEMBER 2010

*F.5-.5&-.&GF+F.!$ As we go to press, the bulls seem to have an iron grip on the market, with key indices rising over three per cent in the third week of September and scaling a 32-month high. But does the market have enough steam to keep the momentum going? The weak recovery in Europe and the US and India’s dependence on foreign flows make the domestic markets vulnerable to external shocks.

BULL STORY

BEAR THREAT

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The biggest reason for the bullish market is a 13.8 per cent growth in industrial production. And even if industrial growth may slow down a bit by December, experts expect that the festive season will keep the growth momentum going.

Backed by the strong economic growth, RBI continues to raise its key rates to curb inflation. This has also led to banks raising their prime lending rates by about 50 basis points. Increase in interest rates could emerge as a threat for the markets and corporate earnings.

%;<=>& The cumulative rainfall, which showed a 13 per cent deficit till July, is now at a deficit of just 0.6 per cent. Good rains will hopefully see prices of agricultural commodity reduce in the near to medium term, thus, improve demand for products and services.

$;6=<=C>& The June quarter results were disappointing with aggregate results of 3,000 companies in the manufacturing sector reporting a decline of 6.43 per cent in net profit from last year. Experts are unsure about earnings growth over the next three quarters.

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Gas price rationalisation, tax reforms and relaxing of FDI in media and retail have shown that reforms are on course. This is key to faster growth, say experts, adding that this will also help bridge the fiscal deficit gap.

The growth in exports is cooling down. In July it was only 13.2 per cent, the slowest in the last nine months. The impact of withdrawal of stimulus benefits and lower demand from China has been felt on Indian exports.

&#/*$-!"#$%

C$%6$+'$.$%'0%#/.'0A%43-$%(#/0% /1$7,/($%2/)#%-$)$-.$)%'0%#/01:% ?0$%2/003(%/2#'$.$%+30A@($-4%A/'0)% ,0+$))%30$%(/8$)%4$/),-$)%(3%5-3($2(% (#$%&'-4%/A/'0)(%)#3-(%($-4%)#328):B% — SACHIT JAIN, ED AND HEAD-FINANCE, VARDHAMAN GROUP

reason to worry. “To have robust financial discipline in an organisation is the need of the hour as all decisions need to be re-examined. Just because we have been doing things in a particular way is no longer a good enough reason to do things that way. Innovation is the name of the game. We have to examine newer sourcing models, work with service providers to reduce costs and improve internal productivity through better processes and automation,” he points out. Anil Saxena group CFO of Religare Industries adds that while there is a fixed price tag on output costs, companies will have to try and curtail input costs to grow. However, he warns that dealing with vendors will be a delicate job for the CFO and his team. “Remember never to kill the vendor by trying

!E&%'0&+/('30%5$-)')()%/(% (#')%+$.$+<%&,-(#$-%('A#($0@ '0A%4/9%6$%2/++$1%&3-:B — C RANGARAJAN, CHAIRMAN, ECONOMIC ADVISORY COUNCIL TO THE PM

to curb costs too much. More often than not, you will get what exactly you pay for,” he says. Padalkar, whose sector faces the prospect of a battle ahead if profit margins are to be maintained, already has a list of dos and don’ts. The key, she says will be to improve productivity at existing (or lower) cost levels, something that is easier said than done. “Innovation is a must. Companies across sectors will have to look at new mediums to boost sales,” she says. “Companies that have large fixed costs such a many offices spread across the country will have to look at converting such fixed costs into variable to ensure that one is not saddled with expenses when growth expectations are not met,” adds Misra of WNS. Padalkar believes unpopular measures such as cutting unproductive manpower in the system may also be needed, specially since, over the years, wage inflation creeps in along with hierarchy building. “The fittest will survive and companies have to shed human resources flab quickly in order to survive. However, the CFO has to be careful not to be the naysayer and has to ensure that adequate investments have to be made in growth initiatives,” she concludes. Some economists and analysts however, feel this is much ado about nothing. For instance, DK Joshi, chief economist at CRISIL believes that the liquidity situation will “ease further from the current level,” when government spending picks up post November. This he argues, will lead to a sobering effect on inflation as well. Notwithstanding such words of comfort, most CFOs feel the next few quarters will be a bumpy ride for India inc. with the fading away of the stimulus and inflation eating into consumer wallets threatening to bring down volume growth for the entire manufacturing sector. The challenge will be to push sales volumes without causing disproportionate increase in operating costs. How CFOs and their core teams manage this will determine the fortunes of their respective firms for the current fiscal and perhaps beyond.

SEPTEMBER 2010

CFO INDIA

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UNFETTERED GROWTH...

ISTHECFO

READY?

A poll conducted amongst 120 CFOs across India shows most feel cost rationalisation is imperative, though downsizing is not an option. DEEPAK GARG

ompanies are gearing up for a new phase of growth and expansion. However, resources and funding are still not easy to come by as the liquidity crunch continues. Given this reality, the CFO must plan for growth while keeping a careful eye on costs. They also must explore all available opportunities for funds through external sources, as well as internal accruals. What are the key strategies and solutions available to achieve these objectives? A survey was conducted by 9.9 Media, in partnership with EMC and Ace Data. The results are based on 120 individual CFO responses from 120 high growth companies spanning several different industries across India.

CFO INDIA

SEPTEMBER 2010

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1 = not effective, 3 = moderately effective, 5 = very effective SEPTEMBER 2010

CFO INDIA

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27%

37%

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22%

31%

20-30%

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In the context of a planned growth strategy, 27% of respondents feel that it is imperative that cost cutting measures are taken. 86% of respondents, as expected, have placed a priority on cost cutting initiatives.

10-15%

15-20%

0-5%

5-10%

CFOs are aiming to cut costs upto 20%, however, the majority are looking at a reduction of between 5-15%, over the next 12 months.

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2.7

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CFO INDIA

SEPTEMBER 2010

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The

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addict Seven-Yearwith a

As CFO of HDFC Standard Life Insurance Ltd, Vibha Padalkar has ensured the insurance major minimised losses during the turbulent 18 months of the economic downturn. She is now busy preparing to complete an IPO for the firm while trying to turn around its fortunes. DHIMAN CHATTOPADHYAY

CFO INDIA

SEPTEMBER 2010

SHE COULD WELL HAVE BEEN an IAS officer like her mother or a sailor travelling across the world. But at a fairly young age, Vibha Padalkar had figured out that finance and accounting was where her calling lay. The fact that her father, a marine engineer in government service, was transferred to the UK when she had just completed her Xth standard, made her choice simpler. â&#x20AC;&#x153;I did my CA from London since my parents had moved there. It was a golden opportunity to study and work with some of the best accounting brains and I spent some of the best days of my life there,â&#x20AC;? says Vibha, who became a CA in her early 20s and who, at 41, today manages the entire financial operations for HDFC Standard Life Insurance Ltd as the CFO. Everything about this lady tells me that she is a go-getter. From the way she carries her-

JITEN GANDHI

Itch

!"#%1,#".-/

/%&'01#2'0 BIG BREAK When I moved to London to do my CA. THE FIRST JOB Lovelock and Lewis. But the defining moment was when I landed the job at Colgate Palmolive. A HA! MOMENT Definitely the IPO at WNS. Everything pales in comparison. Motivating my colleagues, the entire team and making the monumental shift was a high in my career. LITTLE KNOWN FACT I am a stickler for cleanliness. Office or home I want everything neat and in order CURRENT DREAM To successfully challenge LIC of Indiaâ&#x20AC;&#x2122;s hegemony in the insurance sector by 2015

SEPTEMBER 2010

CFO INDIA

!"# !"#$%&' self to the ease with which she answers tough questions (or smiles for the camera post the interview), Vibha exudes a confidence (without ever sounding arrogant) that shows why her team has the respect that it reserves for her. It helps, of course, that she smiles a lot and is not averse to having a few laughs at herself – traits which make any leader a lot more ‘human’ and approachable to her colleagues. It’s clear she is at ease with responsibility and power. Back in the early 90s though, she wasn’t even sure of returning to India. She had stayed back in the UK for a while even after her parents returned home, but Britain of the post-Thatcher era was one where jobs had suddenly become scarce. As Vibha says: “Women, and that too those who were not British or at least European, were not quite top priority on the job meter.” Luckily for her, the India she had left behind in 1986 had changed radically for the better by then. Manmohanomics had opened up the Indian economy and suddenly there were more jobs and more money in India Inc. than before. “I was caught between becoming a practising CA or taking up a job,” recalls Vibha with a smile. So what swung it the ‘job’ way? “I figured I wanted the money but also wanted a life, time to relax and to spend that money. A CA with a large practice is like a 24/7 job,” she laughs. Initially, an uncle who held a senior position in India Inc. at the time helped her land a job at the accounting firm Lovelock and Lewis. During the year she spent here, Vibha did a fair bit of auditing work, the two most significant ones being for Glaxo and ITC. It was in 194 though that her big break came, when she got a call from Colgate Palmolive. It was her first real job interview and predictably, she had her share of nervousness. “I had nightmares before the interview. Amazingly, I got the job without much trouble. The interview went well and there I was walking into their large corporate office in Mumbai. Looking back, there was no real struggling actress stuff in my life, no tears and rejection slips,” she jokes. Since then this smart ‘young’ woman with an impeccable dress sense has only gone from strength to strength, working for C-P’s Mumbai and New York arms for seven years, then joining the software solution providers WNS Global as CFO in 2000 where she worked for seven more years before joining HDFC Life in 2007. 24

CFO INDIA

SEPTEMBER 2010

"*2#0,.)/

!%3.0

NEWSPAPER ET/ Financial Times (UK) MAGAZINE Economist MUSIC Doors MOVIE Roman Holiday

BOOK To kill a mockingbird QUOTE “There is an opportunity hidden in every challenge” DESTINATION Cumbria, UK

ON THE BALL: PADALKAR IS GEARED UP TO FACE THE NEW CHALLENGES THAT 2010 HAS THROWN UP

She happily recalls her WNS days, especially since she had her biggest ‘A ha!’ moment during her stint as CFO at the firm’s Vikhroli office in Mumbai. “I led their IPO. It was my toughest challenge to date and everything else pales in comparison. We were India’s first BPO to list abroad (at NYSE). It was path-breaking and also a time when many of us worked through the night for six months to get things ready. Motivating the team during those tough times, making them believe it was a challenge that all of us across the organisation had to take on together, moving from a private company

!"# !"#$%&'

“We have to attract the best talent to improve productivity and target high-networth individuals and clients across the spectrum through new mediums of communication.” to a listed one – it was not easy by any means,” she admits. So what made her come to the Life Insurance sector? “The IPO bug had bitten me after WNS. The thrill is unparalleled. I came on board to get the HDFC Life IPO done, among other things. It should be a done deal in another few months,” she says candidly. And no, that doesn’t mean the trhill will be gone after that. The Life Insurance sector has so many challenges up ahead, that Vibha is fairly sure she will have enough on her plate to keep her from ever feeling bored. Her ongoing stint at the banking major’s insurance arm, has in fact, weathered many storms, the global economic downturn included. The subprime crisis broke out soon after she joined and the market hit an all time low. “Our expense ratio jumped to 29.2% and we didn’t get our topline. In 200809 we registered a loss of Rs 502 crores. Last year (2009-10) it came down to Rs 275 crore thanks to extensive monitoring on expense control, consolidating and merging offices and sub-letting fixed costs. We clocked revenues of Rs 7005 crore in 2009-10 and this year we intend to get back to making money,” she says matter-of-factly. The coffee arrives at this point and she sits back to almost take stock of the conversation so far. As we sip our cuppa and she gets ready for a photo-shoot, Vibha knows that 2010-11 is not going to be as smooth as this interview has been for her – not by a long shot. Not just for HDFC Life, but CFOs across the insurance sector.

“Managing finances just got tougher. The changes in IRDA norms has adversely affected us. How we increase productivity in the face of this attack on our margins is my biggest challenge in the year ahead,” she says. In 2009-10 margins had remained at a high of 25 per cent. “It will come down to a single digit figure if we manage finances and costs the same way as we did before,” says Vibha. The way out, she feels, does not lie in cutting salaries or simply reducing basic overhead costs but by looking at the positives. “We have to attract the best talent so that productivity per person improves radically. We also have to target highnetworth individuals and clients across the social spectrum through non-manual modes such as mobile phones and the internet. By 2015 we want to be not just the nearest competitor to LIC of India but basically snap at their heels. It may be a pipe-dream now, but by 2015 I see only the fittest surviving in this cut-throat world of insurance and we intend to be there at the very top,” she says, her ambitious and go-getter attitude visible rather clearly. This does not mean that this mother to a pre-teen boy and wife of a filmmaker is busy cracking the whip and making money all the time. “In any case I never crack a whip,” she laughs. “In fact at home I am constantly reminded by my son that I am not the CFO on the home front.” But while she has inherited her IAS mother’s methodical approach to life, she also has a bit of the wandering mar-

iner in her. “Travelling is a passion. We recently went on the Alaska cruise and it was just fabulous. My all-time favourite, of course, is England. Cumbria, for instance, is just picture postcard material,” she says. She also loves splurging on her son, though she claims she has been ‘lucky’ so far. “Yes he loves football and also gaming consoles. But luckily he doesn’t have a clue about branded clothing, unlike girls his age. So I have been lucky this far,” she smiles. Chided by her family about her lack of culinary skills, she has also recently taken it upon herself to learn the fine art of making an apple pie and lasagne! She also loves ‘pottering around the house’ (one wonders when she gets the time for that) and calls herself ‘house proud’ and ‘ a maniac when it comes to keeping everything clean.’ On a more serious note, she admits that the time spent at home is a serious stress buster. Whatever be it – cooking up a storm to prove her son wrong or cracking an IPO to prove her detractors wrong – new challenges are what drives this affable Maharashtrian who grew up on the shores of the Bay of Bengal in Chennai. “I have the seven-year-itch you know. Only for work of course! So every seven years I need new challenges,” she laughs. It has been just been three years at HDFC for her, so there will be many more challenges that Vibha is bound to face at the insurance firm. And going by her track record, her employers know the finances of the company couldn’t be in better hands. SEPTEMBER 2010

CFO INDIA

!"#$%&'(!')#

!"#$"#%&'

MAKING THE TWAIN MEET A Chartered Institute of Management Accountants (CIMA) research on corporate governance looks at how governance styles from the east and west can be merged to evolve a new best practices solution. Excerpts:

PHOTOS.COM

an a system of management essentially governed by preagreed rules of engagement, including principles-based accounting standards seamlessly co-exist with a tradition of governance where trust and relationships are paramount, often at the cost of set rules? A recent research paper by the prestigious Chartered Institute of Management Accountants (CIMA) argues that although practices may vary, the core underlying principles of governance are the same throughout the world. They strive to protect the rights of shareholders, to create an environment of transparency and appropriate disclosure, and to define the roles and responsibilities of stakeholders in running a company. â&#x20AC;&#x153;The measure of good governance in a company should be whether the board of directors is truly focused on the longterm sustainability of the organisation. There should be confidence that the business model will deliver this, with appropriate risk mitigation, and that performance indicators and incentives rein-

CFO INDIA

SEPTEMBER 2010

!"#$%&'(!') force the desired behaviour,â&#x20AC;? it notes. Till 2008, the Western model of corporate governance fancied itself as an end in itself. Broadly speaking, transparency and agreed rules of engagement are paramount in the West. The focus is on rules (including principles-based accounting standards and codes of practice as well as legislation) and transparency, creating a level playing field for competitors. This Western model has led globalisation, produced most of the strongest multinationals and is the bedrock of the worldâ&#x20AC;&#x2122;s developed economies. But, in light of the disproportionate impact of the global financial crisis on Western institutions, there is now widespread recognition that there are limits to what such measures can achieve. There is now much more emphasis on behavioural issues. So what does Asia, Africa and most emerging markets do differently? The CIMA study shows that the approach to business is somewhat different here: relationships sometimes take precedence over transparency. This has its roots in systems in which regulations are not always strongly enforced and legal redress can take years or even decades. In this environment, business is based on trust and loyalty. Yet many are formally adopting Western practices in their journey towards globalisation at the very time that the financial crisis has cast a shadow over the Western governance model. British economist John Kay, in a recent column for the Financial Times, observed: â&#x20AC;&#x153;Lawyers for American companies spent hundreds of billable hours drawing up contracts to which no one ever referred. Their Japanese counterparts engaged in complex business relationships with no formal agreements at all, or ones that covered a single sheet of paper. But the commercial relationships that emerged in Japanâ&#x20AC;&#x2122;s car industry were more successful in securing component reliability and just-in-time inventory than those hammered out by the hard-nosed negotiators of Detroit.â&#x20AC;?

So is there a middle path, a third system that can evolve by bringing together the best practices of the east and west? The CIMA team answers in the affirmative. â&#x20AC;&#x153;Business leaders in the East and West who understand the differences and can extract the best from both styles may stand to benefit. Underestimating the challenge can cause problems. Some Western companies stumbled as they expanded into Asia when their rules-based processes clashed with the local culture, for example. At the same time, Eastern companies aspiring to become powerful multinationals found that their personal networks became strained and ineffective when stretched across vast distances and different cultures,â&#x20AC;? the CIMA study notes.

THE SIGNIFICANCE OF INDIVIDUAL RELATIONSHIPS IN ASIA Individual relationships have been an integral part of business for centuries throughout Asia. Entertaining and getting the measure of a prospective business partner were often the first steps in making a deal, well before benefits and money were even mentioned. Relationships in companies could trump performance and leaders were greatly respected â&#x20AC;&#x201C; their word was law and their decisions indisputable.

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(*+#,-./0123#-2450+#/.#&6,2-# 6427+*/38+09:/1;2-<#,-4+0= 2:4,/-#:2-#;0/85:+#0+23#2-8# 3264,->#?+-+.,46#./0#6427+*/38= +06#4*24#+@523#/0#+A:++8#4*/6+# /..+0+8#4*0/5>*#1/0+#./0123,64,:# 2;;0/2:*+6#?26+8#/-#B0,>*46CD SEPTEMBER 2010

CFO INDIA

!"#$%&'(!')

A 2003 white paper on corporate governance in Asia by the Organisation for Economic Co-operation and Development (OECD) noted: “The informal nature of Asian stakeholder/company interaction can produce real and lasting benefits for stakeholders that equal or exceed those offered through more formalistic approaches based on rights.” The paper also noted that, with the advent of globalisation, there was an increasing tendency in Asia towards creating more formal corporate structures. These factors have combined to reinforce the importance of relationships among Asian companies, including those in Japan, the most developed economy in the region. In his book Keeping Better Company, economist Jonathan Charkham lists three key concepts that govern Japanese culture: a sense of obligation based on relationships, the importance of family (including the corporate family) and the need for consensus. The Chinese example is similar. “When a Chinese company, whether a state-owned enterprise or a private company, takes a decision it always comes into so many issues, and the final outcome will be determined by measuring the impact on people,” says Ellena Au, Chief executive of KanTec Business Consulting in Beijing. However, by placing so much emphasis on individual relationships, Asian firms find it harder to implement procedures that are considered best practice in the West, particularly those that increase transparency – e.g., performance-based evaluations. Their employees can view even basic control tools as a lack of trust in them. Satyam Computer Services, once one of India’s most respected outsourc28

CFO INDIA

SEPTEMBER 2010

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ing firms, went out of business after a scandal that may have been prevented had there been more transparency or questioning within the company. “The scandal exposed a patriarch willing to go to any length to keep control, a web of cosy relationships among members of a seemingly untouchable elite and a governance system that failed to keep either in check,” mentioned a report in the New York Times. The article quoted Ajay Gandhi, an accountant in Satyam’s home-base of Hyderabad, as saying that even outside accountants were unwilling to question the company’s chairman, whom they considered to be their client.

BENEFITS OF TRUST However, criticism of the Eastern corporate governance model has been blunted by the simple fact that Asian companies, even those in the financial services industry, have generally weathered the global financial crisis bet-

ter than those in the West. There was no Asian Lehman Brothers splashed across the headlines. Instead, China’s biggest banks – Industrial and Commercial Bank of China, China Construction Bank and Bank of China – are now the world’s first, second and thirdlargest banks respectively by market capitalisation.

BALANCING THE TWO MODELS Giving relationships pre-eminence can expose fault-lines in governance: failures and fraud can go undetected, systems that lack transparency become more susceptible to corruption and the rights of minority shareholders are jeopardised, for instance. But, as the global crisis has shown, the Western model also carries its share of risk, including an intense focus on short-term shareholder value that can overshadow the prospects of long-term sustainability. The CIMA study therefore identifies

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weaknesses of both models, and argues that these must be addressed as the global economy enters a new era, and their advantages preserved. â&#x20AC;&#x153;Shareholder value and trusted relationships are not mutually exclusive. They can (and possibly should) co-exist in a governance model that balances the two approaches,â&#x20AC;? the report notes. CIMAâ&#x20AC;&#x2122;s boardroom leadership framework provides a useful basis for understanding the relative merits of the two models (see panel). Western-style rules and transpar-

ency have been shown to aid corporate governance, although corporate governance by itself cannot ensure success, of course. In Asia, where so many businesses are controlled by majority shareholders, companiesâ&#x20AC;&#x2122; fortunes are more directly intertwined with the interests of their â&#x20AC;&#x2DC;owner-shareholdersâ&#x20AC;&#x2122;. Minority shareholders, on the other hand, can be classed as â&#x20AC;&#x2DC;investor-shareholdersâ&#x20AC;&#x2122;, who have shorter attention spans and may simply be looking for quick returns. These two groups have divergent interests. Investor-shareholders have only one stakeholder role â&#x20AC;&#x201C; that of shareholder â&#x20AC;&#x201C; and they are generally seeking onl personal benefits. Ownershareholders are possibly more accepting of multiple stakeholder roles, as they may feel a more direct responsibility towards business associates, employees and the community, at which level personal relationship play an important role But beyond the relationship level there may be a diminished acceptance of stakeholder responsibility, such as towards the environment, which is where the Western governance model may be more effective through stricter regulation and enforcement. Yet, while the relationship-based model promotes longer-term thinking, rules and transparency are essential in helping prevent the excesses of individuals, especially those at the top of the corporate ladder. â&#x20AC;&#x2DC;Old-boy networksâ&#x20AC;&#x2122;, as they are known in the West, can often hide dealings that

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are illegally detrimental to competition, customers and community alike. Many Western standards and laws have been set in place specifically to break these opaque networks. In practice, many multinationals from the East and West have tried to find a balance by mixing employees from the home office with local staff, particularly in senior roles. Managed badly, this structure can create damaging conflicts. Managed well, it can create a healthy tension that brings out the best of both views. Sophisticated recruitment policies are crucial to crafting a functional team, as are performance metrics that are customised for local contexts. It is important not to overlook the powerful and fundamental role of management accountants in providing the most relevant and accurate management information to business leaders, wherever the business is located and however it is governed. One possible danger in a top-down management culture is that the integrity of the management information is compromised because people are afraid of telling their bosses anything they donâ&#x20AC;&#x2122;t want to hear. The professionally qualified accountant, bound by a code of ethics, has a duty to resist this temptation. A key task of the professional accountant in business is to demonstrate in practice the long-term strategic value of the right information.

WHAT TO DO In helping companies in both the East and the West find this balance, management accountants must be careful not to haphazardly impose Western models that have their own intrinsic faults. Instead, they would be wise to understand the benefits that relationshipbased models offer and help to create a system that mitigates the disadvantages and keeps the advantages through appropriate financial plans, incentive structures and information systems. Those who are successful will build tremendous shareholder value. SEPTEMBER 2010

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WHY GOOD BOSSES TUNE IN TO THEIR PEOPLE Know how to project power, counsels Stanford management professor Bob Sutton, since those you lead need to believe you have it for it to be effective. And to lock in your team’s loyalty, boldly defend their backs. ROBERT I. SUTTON

MCKINSEY

osses matter. They matter because more than 95 percent of all people in the workforce have bosses, are bosses, or both. They matter because they set the tone for their followers and organisations. And they matter because many studies show that for more than 75 percent of employees, dealing with their immediate boss is the most stressful part of the job. Lousy bosses can kill you—literally. A 2009 Swedish study tracking 3,122 men for ten years found that those with bad bosses suffered 20 to 40 percent more heart attacks than those with good bosses. Bosses matter to everyone they oversee, but they matter most to those just beneath them in the pecking order: the people they guide at close range, who constantly tangle with the boss’s virtues, foibles, and quirks. Whether you are the CEO of a Fortune 500 company or the head chef at a restaurant, your success depends on staying in tune with the people you interact with most frequently and intensely. All bosses matter, but those at the top matter most. Whether or not they know it, their followers monitor, magnify, and often mimic their moves. I worked with a large company where the CEO did almost all of the talking in meetings, interrupted everyone, and silenced dissenting underlings. His executive vice presidents complained about him behind his back, but when he left the room, the most powerful EVP started acting the very same way. When that EVP left, the next-highest-ranking boss began imitating him in turn. The ripple effects of this CEO’s style are consistent with findings from peerreviewed studies showing that senior executives’ actions can reverberate throughout organisations, ultimately undermining or bolstering their cultures and performance levels. When CEOs have far more pay and power than their direct reports do, for instance, performance can suffer if their subordinates feel they can’t stop them from making and implementing lousy decisions. A few years ago, I did a workshop with a management team struggling with “group dynamics” problems. Team members felt that their boss, a senior vice president, listened poorly and “ran 30

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THE PROBLEM As the boss, you are the most important person in the organisation, and subordinates monitor, magnify, and mimic your every move. You need to stay in tune with this relentless attention and use it to your advantage. WHY IT MATTERS Your success and influence as boss depends on correctly reading those with whom you interact most frequently and intensely. Because your leadership style reverberates throughout the organisation, ultimately it will bolster or undermine company performance and culture. WHAT YOU SHOULD DO ABOUT IT The first and most important task is to convince others that you are in charge, otherwise your job will be impossible and your tenure short. Second, boost your subordinates’ performance by “watching their backs”: making it possible for them to learn and take intelligent risks.

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asked his subordinates to estimate the results, and they did so accurately. Then the senior vice president returned. He recalled making about 25 percent of the comments, interrupting others perhaps 3 times, and being interrupted 3 or 4 times. When I showed him the results and explained that his direct reports had estimated them far more accurately, he was flabbergasted and annoyed. Being a boss, as this exercise shows, often resembles the role of a high-status primate: your subordinates watch you constantly, so they know more about you than you know about them. Likewise, anthropologists who study chimpanzees, gorillas, and baboons

report that followers devote far more attention to their leader than he devotes to them. (Studies of baboon troops show that typical members glance at the dominant male every 20 or 30 seconds.) As Princeton University psychologist Susan Fiske observes, primates— including ourselves—“pay attention to those who control their outcomes.” Linda Hudson, CEO of BAE Systems, got this message after becoming the first female president of General Dynamics. After her first day on the job, a dozen women in her office imitated how she tied her scarf. Hudson realized, “It really was now about me and the context of setting the tone for the organization. SEPTEMBER 2010

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(#)(%*' That was a lesson I have never forgotten—that as a leader, people are looking at you in a way that you could not have imagined in other roles.” Hudson added that such scrutiny and the consequent responsibility is “something that I think about virtually every day.” The best bosses work doggedly to stay in tune with this relentless attention and use it to their advantage. They are self-absorbed, but not for selfish reasons. On the contrary, they know that the success of their people and organisations depends on maintaining an accurate view of how others construe their moods and moves—and responding with rapid, effective adjustments. That view is invaluable for bosses as they try to carry out their first and most important task: convincing others that they are in charge. Bosses who fail to do this will find their jobs impossible, their lives hell, and their tenures short. Of course, taking charge effectively isn’t enough. The best bosses also boost performance by watching their people’s backs: making it safe for them to learn, act, and take intelligent risks; shielding them from unnecessary distractions and external idiocy of every stripe; and doing hundreds more little things that help them achieve one small win after another—and feel pride and dignity along the way.

TAKING CONTROL James Meindl’s research on “the romance of leadership” shows that leaders get far more credit—and blame— than they deserve, largely because, cognitively, it is easier and more emotionally satisfying to treat leadership as the primary cause of performance than to consider the convoluted and often subtle mishmash of factors that actually determine performance differences. It is especially difficult to resist demonizing the bosses of failing organisations, however irrational that may be. This bias toward glorifying and vilifying individual leaders (and downplaying the role of systems, collective action, and external factors outside management’s influence) is especially 32

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Stanford University management professor Bob Sutton says it’s an illusion that the boss is truly in control, and suggests seven “tricks” for enhancing that perception +

Talk more than others, but not the whole time.

People who talk first and most are seen as leaders. But if you talk the whole time, people will find you a bully, a bore, or both.

Interrupt occasionally

and don’t let others interrupt you too much. You can augment your power by winning “interruption wars” at key junctures in meetings.

Cross your arms when you talk

When people make this gesture, they persist longer and generate more solutions while working on difficult tasks.

Use positive self-talk

People who make encouraging statements to themselves enjoy higher self-esteem and performance.

Try a flash of anger occasionally

The strategic use of outbursts generates an aura of competence. But spewing out constant venom earns you a well-deserved reputation as a jerk.

If you aren’t sure whether to sit or to stand, stand

This point is especially crucial for a new boss. Standing up signals that you are in charge and encourages others to accept your authority.

Surrender some power or status

but make sure everyone knows that you did so freely.

strong in the United States and many European nations. Yet the best evidence shows that bosses rarely account for more than 15 percent of the gap between good and bad organisational performance—although they often get more than 50 percent of the credit and blame. If you are a boss, this is your lot in life; make the best of it. If you claim that you don’t have much influence over what happens to the team or company you lead, your people will lose confidence in you and

your superiors will send you packing. Here are four suggestions for magnifying the illusion of control

EXPRESS CONFIDENCE EVEN IF YOU DON’T FEEL IT In 2002, I heard Andy Grove, Intel’s legendary CEO (1987– 98), interviewed by Harvard University’s Clay Christensen, who asked Andy how leaders can act and feel confident despite their doubts. He answered,

(#)(%*' “Investment decisions or personnel decisions and prioritization don’t wait for that picture to be clarified. You have to make them when you have to make them.” That’s why executives need to use what I call the faking-it-until-youmake-it strategy, which he also touched on: “Part of it is self-discipline, and part of it is deception. And the deception becomes reality. It is deception in the sense that you pump yourself up and put a better face on things than you start off feeling. But after a while, if you act confident, you become more confident.” Research showing that “belief follows behavior” supports his argument. And confidence is especially crucial for inspiring your followers, because like all emotions, it’s contagious—especially when displayed by closely scrutinized bosses.

credit. I believe that one reason IDEO became a renowned innovation firm under David’s leadership is that he relentlessly thanks others for making him look good, gives them credit when the company does something great, and downplays his contribution—something I have observed him do hundreds of times over the past 15 years. Indeed, the best bosses routinely give their followers more credit than they probably deserve. And when bosses do this, everyone wins. As the boss, you will get the lion’s share of credit because of the romance of leadership. Your immediate team will regard you as truthful. And your modesty and generosity will be admired—especially by outsiders, who will see you as both competent and generous.

DON’T DITHER Indecision, delay, and waffling are the hallmarks of a crummy boss; the best ones know that crisp and seemingly quick decisions bolster the illusion (and reality) that they are in charge. As late stage director Frank Hauser said, “You have three weapons: ‘Yes,’ ‘No,’ and ‘I don’t know.’ Use them. Don’t dither; you can always change your mind later. Nobody minds that. What they do mind is the two minutes of agonizing when all the actor has asked is, ‘Do I get up now?’”

BLAME YOURSELF In August 2008, I listened on the radio as Maple Leaf Foods CEO Michael McCain made a statement about the deaths and illnesses traced to tainted meats produced by one of his company’s plants. McCain’s voice quivered as he announced its closure, apologized to the victims, and said that the people at Maple Leaf—including himself—were responsible and that it was his job to restore faith in the company. His response is striking because it is so rare yet so consistent with research on how to fuel the illusion (and reality) that the boss is in charge. Unlike many people in such a predicament, McCain accepted the fact that he would be held responsible for what his people did, no matter what. When something important happens, the boss is expected to know. Rather than blaming others, McCain understood it was wiser to accept the blame and learn from it. Leaders who denounce outside forces for their troubles come across as disingenuous and powerless. By refusing to take responsibility, they implicitly raise a damning question: “If you didn’t have the power to break it, how can you have the power to fix it?” The public also sees

GET AND GIVE CREDIT A great thing about being the boss is that when your people do good work, you usually get too much of the credit. Smart bosses often use this to their advantage, knowing that people want to work for and do business with winners. As a boss, you may already use subtle tactics to get credit, such as collaborating with people who are likely to praise you (so that you don’t have to brag) and, when you do mention your accomplishments, giving copious credit to others. David Kelley, the modest chairman and founder of design firm IDEO, is a master of the art of giving his people

a boss’s refusal to accept responsibility as a sign that nothing has been learned from the errors. If you as a boss want to enhance the perception that you are in charge—and fuel performance at the same time— taking at least some of the blame is usually necessary. Experiments by University of Michigan professor Fiona Lee and her colleagues show that managers who take responsibility for problems like pay freezes and failed projects are seen as more powerful, competent, and likeable than those who deny responsibility. In another study, Lee’s group examined stock price fluctuations in 14 companies over 21 years. They found that when top executives accepted responsibility for problems, stock prices were consistently higher afterward than when CEOs denied responsibility. The key, though, is not just to accept blame and apologize. You must also take immediate control in whatever way you can, show that you and your people have learned from failure, announce new plans, and, when they are implemented, make sure everyone understands that things are improving because of them—just as Michael McCain did. Although no one can predict his company’s ultimate fate, the Canadian press praised McCain for his clarity, compassion, and control. A nationwide survey in December 2008 showed that among Canadians, confidence in the Maple Leaf brand had risen to 91 percent, from 60 percent, since August of that year. Although the company reported losses in 2008, it returned to profitability in 2009. As McCain said in February 2010, “The packaged-meats business continues to recover. Our brands and our reputation are intact”—an assessment most analysts and customers echoed.

BOLSTERING PERFORMANCE Bosses who ignore and stomp on their subordinates’ humanity sometimes generate quick gains. But in the long run, such short-sightedness usually SEPTEMBER 2010

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(#)(%*' undermines their followers’ creativity, efficiency, and commitment. The best bosses focus on boosting the performance of their people through stratagems such as the three that follow:

PROVIDE PSYCHOLOGICAL SAFETY Good bosses spark imagination and encourage learning by creating a safety zone where people can talk about half-baked ideas, test them, and even make big mistakes without fear of ridicule, punishment, or ostracism. I witnessed the power of psychological safety at a large media company where a new CEO was determined to drive out fear. A vice president had launched a magazine that ended up being an expensive, well-publicised flop. She would have been demoted and fired—and probably publicly humiliated—under past regimes. Instead, the CEO spoke at a gathering and congratulated her for her courage and skill. He emphasized that the decision to start the magazine wasn’t just hers; senior management had backed it. After his speech, every executive I spoke with portrayed the CEO’s comments as a watershed event. An absence of psychological safety, in concert with fear of the boss, can be dangerous or downright deadly. Studies by Harvard Business School professor Amy Edmondson and her colleagues show that when nurses fear their supervisors will punish and humiliate them for making mistakes, they hesitate to report their drug-treatment errors. The hazards of fearing authority also emerge from research with commercial pilots in flight simulators. One study showed that when pilots faked mild incapacitation toward the end of a rough and rainy simulated flight, their copilots failed to take the controls 25 percent of the time—resulting in simulated crashes. The copilots knew the pilots were incapacitated yet failed to question their authority. Dysfunctional deference can kill real flight crews and passengers too. In 1979, a commuter

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plane crashed, in part, because the second officer failed to take control when the captain, a vice president known for gruffness, became partly incapacitated.

SHIELD PEOPLE The best bosses invent, borrow, and implement ways to reduce the mental and emotional load heaped on their followers—and protect them from the incompetence, cluelessness, and premature judgments of fellow bosses or others who can undermine their followers’ work and well being. Followers who

nated the penalties that were levied when ships arrived at the terminal’s dock but (despite considerable advance warning) workers weren’t ready to load them. These “demurrage charges,” which cost the company $2.5 million the year before the revolution, were down to $10,000 the year after. Previously, it had taken more than three hours to load an average truck. Afterward, more than 90 percent were loaded within an hour of arrival. Surveys and interviews by University of Southern California researchers showed that employees became more satisfied with

$))3'8)**+*'*621>'.52/.024.)0' 203'+0=)712/+'@+210.0/'8:'=1+; 24.0/'2'*2C+4:'K)0+',-+1+'6+); 6@+'=20'42@>'28)74'-2@C;82>+3' .3+2*A'4+*4'4-+5A'203'+B+0'52>+' 8./'5.*42>+*',.4-)74'C+21? enjoy such protection (and who may be bosses themselves) have the freedom to take risks and try new things. Annette Kyle, for example, managed some 60 employees at a Texas terminal where they loaded chemicals from railcars onto ships and trucks. In the mid-1990s, Annette led a “revolution” that dramatically raised her unit’s performance through a host of changes, including better planning, greater responsibility at the lowest levels, improved and more transparent metrics, and numerous cultural changes. She personally sewed “no whining” patches on workers’ uniforms, for example, to discourage the local penchant for complaining and auctioned off her desk to workers for $60 because, as she explained it, “I shouldn’t be sitting behind a big desk. I should be contributing to team goals however possible.” This transformation virtually elimi-

their jobs and felt proud of their accomplishments. I asked Annette how she could make such radical changes in her giant company. She answered that her boss shielded her from top-ranking managers—he found the resources and experts she needed but never discussed these moves with senior management until they succeeded. Good bosses are especially adept at protecting their people’s time—for example, by eliminating needless meetings. Take a cue from Will Wright, designer of computer games such as The Sims: rather than automatically scheduling meetings, ask yourself if they are really needed. Wright employed a clever trick. Every time someone called a meeting, he charged that person a dollar. Although he collected a lot of dollars, this requirement made people “think twice, even though it was only a dollar.” He also used an employee-centered

(#)(%*' method to keep meetings short—inviting the creative but impatient artist Ocean Quigley, “the canary in the coal mine.” When Quigley raised his hand to be excused, “we knew that the meeting had hit diminishing returns.”

MAKE SMALL GESTURES The late Robert Townsend, CEO of Avis and author of the masterpiece Up the Organization, called the phrase “thank you” a “really neglected form of compensation.” The broader lesson for bosses is the importance of “the attitude of gratitude,” a line borrowed from Kimberly Wiefling, founder of Wiefling Consulting, who argues that too many projects end without acknowledgement and celebration and that whether a project succeeds or fails, the best managers take time to express appreciation. Conveying this attitude is especially crucial when the stench of failure fills the air—precisely the time when people most need support from the boss and one another. Bosses with the will and

the skill to provide that kind of support set the stage for learning from fiascos. Unfortunately, too many bosses have the opposite response and use such occasions to conduct “blamestorms” or “circular fire squads,” where the goal is to point fingers, humiliate the guilty, and throw a few overboard. Good bosses don’t just get more from their people and do it in more civilized ways; they attract and keep better people. If you think your employees are deadbeats, downers, and jerks, look in the mirror. Why don’t the best people want to work for you? Why do people who appeared to be stars when they joined your team seem to turn rotten? Of all the skills and aspirations good bosses must have, self-awareness is probably the most important. Cornell University’s David Dunning has shown that poor performers consistently overestimate their intellectual and social skills. In contrast, the best performers accurately judge both their strengths and their flaws. Dunning’s research has crucial implications for leadership. The

best and worst bosses alike suffer from overconfidence and insecurity, from weaknesses and blind spots. Such is the human condition. Yet the best bosses are keenly aware of their flaws, work to overcome them and to reverse the resulting damage, and enlist others who can compensate for their weaknesses. The most effective bosses devote enormous effort to understanding how their moods, quirks, skills, and actions affect their followers’ performance and humanity. They constantly make adjustments to be a bit more helpful and constructive tomorrow than they were yesterday. To be a great boss, you must constantly ask and try to answer many questions. Perhaps the most crucial is, “What does it feel like to work for me?” If your people answered this question honestly, would they say that you know the impact your words and deeds have on them—or that you are living in a fool’s paradise? Copyright © 2010 McKinsey & Company. All rights reserved.

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HONING A TALENT FOR RETAINING TALENT Smart CFOs understand the real cost of losing talented people in a recession and having to recruit them again. Knowing that this also affects the bottom line, is key to their success. MIKE JOHNSON

PHOTOS.COM

uropean executives have often looked askance at the United States in the parlous times of economic depression, believing that the phrase “quick to hire and quicker to fire” accurately described the nation’s employment practices. Against historic trends, however, some workforce experts say US employers have worked harder to retain their employees in the current economic environment. Göran Hultin, a former deputy director general of the Geneva-based International Labour Office, says, “Indeed, they [US] have practically matched Europe in their outright zeal to not resort to mass dismissals.” Is this a change of heart on the part of America’s employers? According to Hultin, who publishes the quarterly Global Employment Outlook, the US industry has held off dropping the axe for highly pragmatic reasons. “In Europe, employers have been reluctant to fire during this recession for the key reason that employment laws make it cost a lot to dismiss people — you think twice, possibly three times.” But in the US, he continues, 36

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employers are reluctant for one reason: They don’t want to lose skills and talent they worked so hard to hire and train. Lose them, he says, “and it’s a very costly exercise to get them back.” Hultin’s right. People cost money and talent costs even more. Most organisations seem to be adept at separating people and money into two piles: Human resources is concerned with employees and the finance department is responsible for counting the results of those efforts. The problem for many organisations is that people make up as much as 99 percent of the corporation’s assets. Consider, when these employees leave every evening it is their choice to return the following morning.

More than that, employment costs — especially for today’s people-centric businesses — make up a staggering amount of the overall operating charges of most corporations. Says Anthony McAlister, a partner of Thorburn McAlister, a London-based executive search and employment analysis firm that specialises in helping organisations deal with “the difficulties of transition” for senior executives, “The problem is that with hiring and firing, risks are practically impossible to quantify, and therefore most CFOs ignore them.” There’s good reason for this, he adds. “Historically, CFOs operated on the principle ‘we only measure what can

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be measured.’ That view doesn’t work in today’s complex and increasingly ambiguous world.” McAlister explains that poor hiring and firing practices directly impact bottom lines. Although it may be difficult to audit and hang numbers on, a “recently removed angry, loose cannon can do untold financial damage in a very short space of time. Bad-mouthing the organisation, stealing talent from it, moving to the competition, taking key accounts — all these hit the bottom line big time,” he says. All that potential for doing damage from a disgruntled, poorly handled exemployee, he says, has now been magnified by today’s technology. As McAlister suggests, “remember that social media works both ways. While your HR department is trawling around Facebook and LinkedIn for hot candidates,

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()%!*+,-(," your ex-employee is there, too — trashing your corporate reputation to anyone at the click of a mouse.” His view is that in today’s world, the costs involved — financial and reputational — mean that smart CFOs need to be part of the transition process from an early stage. Here are some other areas where CFOs can get involved in the people and profit-equation and help impact that bottom line: Productivity increases: Happy employees are the most productive. Budgets for developments that make employees feel better about their jobs make sense. Litigation: Bad firing practices are expensive. The way around that is to set up the right sorts of systems and tackle issues before they result in legal action. Allegedly wronged employees (especially at a senior level) can wipe a lot of percentage points off a struggling bottom line. Tip for CFOs: Make sure there is a robust and practical system in place to identify and deal with these kind of issues at all levels and be prepared to intervene early at the top level. Audit the costs of hiring and firing: Turnover costs money and too much of it. Both exit and recruitment processes become very expensive. Too little and you starve your business of new talent and new ideas. Auditing recruitment, retention and redundancy should be an integral part of every CFO’s budget process. Create a talent register: Force this issue if you have to, it is often a life saver, and maybe even for your own job. In today’s highly specialised world, it is vital that the organisation knows not only who the talent is but what it is prepared to do. Tip for CFOs: Work with your human resources department on this.

Internal coaching saves money: If you want to hold onto those productivity increases, improve retention and make sure your business is a talent magnet,

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E6:95#(5-4/#FG-::/=H2<*/I# %/26:<-*45<.4 Managing talent — especially talent you don’t fully control — is always fraught with potential difficulty. Richard Savage, a United Kingdom-based organisational adviser, points out that many Chief Financial Officers get into tough situations because they don’t insist on having responsibilities spelled out in black and white. Often, he says, “with large international organisations, you’ll find that businesses are broken up by regions or business streams. In structures like this, it is quite usual to have local finance directors (FD) report to their heads of business sector or region, with a dotted-line report to the CFO at corporate headquarters.” Still, this relationship can lead to problems. “Local FDs have to please their boss and so the CFO [at corporate] can be put into a very difficult situation in trying to get things achieved that he or she sees as necessary for the whole business.” Savage’s advice: “From the very beginning, get it clear in writing which part of the dotted-line relationship is between the CFO and the local FD. Spell out which part of the relationship is between the local FD and his [or her] local boss. That way it is all too clear who takes responsibility for what.” A note of caution: “This is especially true when things begin to unravel — usually around year-end.”

one sure-fire way to ensure productivity increases is to keep developing your people. Clear out the “same old consultants.”: During this recession, many smart CFOs have used the time to challenge convention. It is a chance to stand tradition on its head and look at other ways of doing things. No organisation is going to come back from this recession looking like it did two years earlier. As part of that, CFOs can lead the efforts to look for new suppliers of talent (e.g. recruiters, executive search firms), rework contracts and challenge convention on everything. Tip for CFOs: There is nothing that should not be up for review. There is little doubt that top-end departures make headlines. What the CFO doesn’t need is that news headline making headlines in the annual report. “Senior executives leave organisations all the time for a wide variety of reasons — under-performance, personality clash or simply a casting error at the recruit-

ment stage,” McAlister says. And, with the exception of retirement, he adds, “it is nearly impossible to plan for. But it is possible to manage it better.” He points out that “firing people in 2010 puts the organisation at considerable reputational risk and must be the responsibility of the leadership team, not just HR.” Senior executives who distance themselves from these developments, he says, “not only demonstrate poor leadership but worse, misunderstand the great opportunity that is presented to make things better for the business.” He feels: “You have to begin to think differently. Don’t stick with the status quo. You can’t afford to.” As McAlister suggests, “using national one size fits all” outplacement consultancies for senior executive exits is both short-sighted and not as cost effective as you think. As Hultin noted previously, corporations across the US have worked hard — using strategies such as furloughs, part-time and job-share initiatives — to

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hold onto the talent they want to keep. But transition, of course, works both ways. Even in these tough times companies find themselves with the other need — recruitment. Here, McAlister’s partner, Lindsay Thorburn, highlights a few items that too often get left out. First, she says, “knowing who you’re going to

hire as a replacement when one of your senior executives quits is the difference between being on the front foot or the back foot. It makes the crucial difference about who is really in control.” Second, she says, taking the easy option and going for the natural internal candidate (usually because it is quicker and cheaper) may reduce the risk of failure somewhat, but usually means that “what you get is a person who is ‘fit for purpose’ but not ‘best of breed.’ ” Thorburn believes that talent management, like communism, “works in theory, but not in practice.” When you have the right person ready to step into a vacant senior role it is usually a coincidence of timing. She says the “acid test in any organisation is how often its people are being head-hunted.” Indeed, adds Thorburn, “if your people are not being poached, you might want to think what that really means. In my experience it doesn’t usually indicate that your retention strategies are worldclass.” According to her, partnering with a flexible and innovative search consultancy can do the following: Analyse all key roles in the organisation. Understand exactly what the role entails. Most organisations only do this when there is a vacancy and often key elements are crucially overlooked. Identify the “heir apparent” and

=%,%"&'1-#12-'%"'>?@? '1*.0'.(-'#,&/"%0/.%#"' /.'3#"0%9-,/:2-',-1*A ./.%#"/2',%0;'/"9'4*0.' :-'.(-',-01#"0%:%2%.)' #5'.(-'2-/9-,0(%1' .-/4B'"#.'C*0.'DE< — ANTHONY MCALISTER, PARTNER, THORBURN MCALISTER

benchmark them against best of breed. Advise on development where relevant, but have a third party deliver this to avoid a conflict of interest. Identify four people externally for each role who are interested in joining the organisation. Be transparent and inclusive with all candidates and establish personality and culture fit as early on as you reasonably can. Innovate different fee structures to accommodate better the needs of the organisation. Among the benefits of hiring smarter are ensuring you have best-of-breed candidates, reduced cost of promoting internal candidates, demonstrable “good governance,” faster on-boarding time for external hires and effective risk management of key executives. Here, the CFO can take a real lead and also act as the “conscience” of the organisation. Whether it is seeking ways to make people better (and saving money at the same time) finding new ways to recruit or being sensible with removing those who need to move on, the CFO has both an active and a governance role. Few companies will come back from the recession the same as they were two years ago. And they shouldn’t. Smart companies and smart CFOs know that there is a lot that can be done to not only improve the bottom line but hone and sharpen the people power that leads to those improvements. Auditing people power rather than simply adding up dollars may be the new-look CFO recipe for a healthy corporation for the next decade. Effective corporate oversight — a key role for any CFO — should not only include balancing the company’s books, but ensuring that its employees are balanced too. MIKE JOHNSON IS CHAIRMAN OF THE GLOBAL THINK-TANK FUTUREWORK FORUM AND A CONSULTANT AND WRITER. © 2010 FINANCIAL EXECUTIVES INTERNATIONAL

SEPTEMBER 2010

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ACCOR’S BRAND NEW IDENTITY Sandeep Banerjee, CEO & MD, Accor Services unveils new corporate brand identity, christened Edenred

andeep Banerjee, managing director & CEO, Edenred India addressed Edenred corporate customers, business associates and several corporate dignitaries unveiling Accor Services’ new corporate brand - Edenred. The events were organised in partnership with Nine Dot Nine Mediaworx Pvt Ltd in New Delhi and Bangalore. In the New Delhi event, held on July 23 at the Radisson Hotel, keynote speaker Anuradha Das Mathur, co-founder & director, Nine Dot Nine Mediaworx Pvt Ltd, presented her views on leading in times of change and that ‘change -is-a-constant’ is passé. “It is the unprecedented pace of change that is a contemporary challenge. There is change at three levels – macro and external; organisation level and then the individual level. What does this mean for leadership and those who are at the forefront of change? Leadership and followership – both must adapt to a new world order. Based on personal experience and as an observer of the corporate landscape,” she said. Sandeep Banerjee later explained the rationale behind the demerger of Accor Group’s two businesses - hospitality and services. Sandeep then decoded the brand Edenred and what it meant to each of the stakeholders. The event was concluded by Ajey Vij, faculty member of Art Of Living. His session comprised of exploring the tendencies of the mind that induce stress and breathing exercises that help in stress elimination leading to a work life balance. The event was attended by the who’s who of the HR industry. In the second event held in Bangalore, on July 29 at the Gateway Hotel, the keynote speaker Debashish Mitra, founder and managing 40

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*)'+*)#(,)# -%&"*#.#)*)"%)* EDEN stands for Entreprendre Différemment Ensemble denoting: Act, conquer, move off the beaten track and take risks, together. Eden also means “Paradise” in eight languages. It evokes a feeling of wellbeing: the elements that characterize the company’s activity, which contributes to social cohesion. RED : A color firmly grounded in Edenred’s history for over 50 years, whose symbol is represented by the red ball. Incidentally, Red also signifies “network” in Spanish, a symbol of connection between all Edenred’s stakeholders’ corporations, local authorities, employees, citizens, affiliates and public authorities.

ACCOR SERVICES’ NEW IDENTITY AND LOGO (BELOW) LAUNCHED AT AN EVENT BY ACCOR CEO & MD, SANDEEP BANERJEE (LEFT)

director, Calypso Foods presented his thoughts on leading in times of change. Mitra’s session was followed by Sandeep Banerjee talking about how Edenred evokes a host of meanings and ideas. “It is a human and generous brand, that is clear-sighted and optimistic, inventive and on the move, a brand that is a step ahead, useful, discreet, affective, international and multi-local,” he enlightened the audience. Like previous session in the New Delhi event even this session was concluded with a workshop by Shivani Shivhare, faculty member of Art of Living on how to deal with stress and how to strike a work life balance. Edenred today has a global presence in over 40 countries, with 33 million service users, 500,000 companies and public institutions using its services, a network of 1.2 million affiliated merchants and service providers and 6,000 employees. Starting with 2 products in 1955, Edenred today has a suite of over 27 innovative offerings with a unique business model based on win- win relationships. SEPTEMBER 2010

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Coffee to Binding Cultures 42

CFO INDIA

SEPTEMBER 2010

JITEN GANDHI

From Blending

n March 2007, coffee chain Barista (now Barista Lavazza) changed hands for the second time in its less-than-a-decadeold existence. This time it was taken over by the sixth largest coffee roaster in the world, the Italian espresso chain – Lavazza, which acquired the firm from Chennai-based Sterling Group. It was a big step for the Indian café brand in more than one way. Barista could now leverage 112 years of Lavazza’s experience, apart from being a part of over 24,000 outlets the Italian chain operates in more than 80 countries. But, with the big opportunity came big challenges – to blend the two cultures (Indian and Italian) while

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&'()*+",-.& NATURE A tricky post-M&A situation TIME FACTOR March 2007 TEAM The entire finance team and in fact, most of the senior management across functions PROJECT COST Not disclosed END RESULT Managed to ensure that the Italian chain’s global best practices were brought in while keeping Indian taste buds and cultural peculiarities in mind. Helped the firm achieve higher footfalls across India.

raising the bar in India to live up to Lavazza’s name. Rajesh Sharma, chief financial officer at Barista Lavazza, recalls the biggest challenge he faced till date, how he tackled it and what he learnt from it. Over to him...

THE CHALLENGE “I joined Barista bang in the middle of the transition. In a way the shift from being the pioneers of café culture in India to becoming a part of the wellestablished Italian espresso brand was a challenging one,” says Sharma talking about the takeover of Barista by Lavazza. Lavazza’s biggest USP is the concept of the blend – a complex art of mixing together coffee of different origins to obtain a distinctive taste and

Rajesh Sharma, CFO of Barista Lavazza, talks about how he, along with his core team, tackled a tricky situation when Italian coffee chain Lavazza acquired Barista. ANOOP CHUGH harmonious flavour in every cup. “We, at Barista Lavazza, were at the forefront of mixing coffee of different origins, but this time we also had to blend two different coffee cultures together. The challenge was to adopt Lavazza’s international best practices while not losing out on the great network that Barista had built over the years. At the same time, as the finance head I had to ensure all this would lead to a higher turnover,” recalls Sharma.

HOW THEY DID IT The hard work started immediately after the takeover. It was a three-step process says Sharma – coming up with a cost-effective plan that gave all Barista outlets a cool ambience, an allnew menu and creating a buzz around its new USP, the barista (a person who makes and serves coffee in a bar) training. “A uniform ambience across India, with facilities like wi-fi and blu-fi for our customers with ample reading material at their disposal, was the idea we wanted to implement,” Sharma says. Barista Lavazza continuously evolved its food and beverages menu across all its over 200 outlets but maintained similar menus across the country, a calculated gamble. “We launched the same breakfast menu across India. Poha, which was a hit in western India, worked wonders in all the markets, even the north and south, leading to a steady financial growth,” he says. The biggest challenge however, was to train the baristas. “In Italy, there are basically two types of coffee professionals: the first is the barista, who serves most espresso drinks, gelatos,

soft drinks and pastries. The second is the bar man who, in addition to having the capabilities of a simple barista, also understands the preparation of a menu of hors d’oeuvres, and has the ability to supervise and manage things professionally,” explains Sharma. It is the transformation of the baristas to bar men that has been the biggest achievement in India, well worth the money invested, says Sharma. “When you ask a steward at Barista about a dish or drink you are consuming, he or she will give you an answer that will add to your knowledge,” he adds.

THE LESSONS The experience was a learning curve for Sharma in more ways than one. Firstly, the best international practices and food items would sell here like hot cakes only if customised, keeping the local taste buds in mind. “We serve what you want us to serve without losing our pedigree. While we have adopted secret recipes from Lavazza Italy, we also offer local cuisines and drinks. For instance, we don’t just serve cappuccinos, but masala tea as well,” says Sharma. The unique East-West blend of cafés has been the biggest learning for Barista Lavazza. The second lesson Sharma learnt was more about HR practices and public relations. “The entire exercise of the customised-menu and trained-baristas has helped build a brand loyalty. They realise that we know our espressos just as we know their tastes. In the long run this translates into greater footfalls and higher RoI,” he concludes. SEPTEMBER 2010

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PUNE’S TRYST WITH RISK MANAGEMENT STRATEGIES The ICICI Bank-CFO Institute seminar in partnership with ISB, saw an impressive turnout and an engrossing session on how to manage risk in the face of currency volatility.

aturday, August 20, 2010, saw Pune’s ‘Silicon Valley’ descend at the Sun-n-Sand hotel in the city for an evening that promised to enhance their knowledge on risk management. The occasion: a seminar on ‘Redrawing strategies for the IT/ITeS sector’ hosted by ICICI Bank in collaboration with the Indian School of Business (ISB) and the CFO Institute. Opening the evening’s proceedings, Dr Ramabhadran S Thirumalai, assistant professor at the Hyderabad-based Indian School of Business (ISB), spoke about the basics of risk management, the benefits and costs involved, the key techniques to manage risks and the fact that most Indian companies still do not have a chief risk officer in place, an indication that managing risk is still a subject in its infancy in India. In his 45-minute speech on ‘Strategies for forex risk management and trade finance’ Prof. Thirumalai highlighted the fact that risk management is not simply about minimising risks as many might think – but about taking intelligent risks to reduce potentially hazardous situations for the company while taking calculated risks which would boost the firm’s profit margins. “The chief difficulty that a CFO or a CRO may face when trying to create an effective risk management

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PROFESSOR RAMABHADRAN THIRUMALAI OF ISB DELIVERS THE THEME ADDRESS ON RISK MANAGEMENT IN THE INDIAN CONTEXT AT THE SEMINAR IN PUNE RAJENDRA SHREEMAL, CORPORATE TREASURER, WIPRO EXPLAINS THE FUNDAMENTALS OF HEDGING STRATEGIES AT THE SEMINAR

strategy is to try and convince the management, the stakeholders and large investors about the need to reduce certain risks even if it means lower returns for the investors in the short run,” he explained. Banks, he argued, played a significant and often dominating role in a firm’s risk management plans, since over half of those polled in a recent global survey (53%) admitted that they considered foreign exchange risks or currency volatility as the highest risk factor. Quoting another study, he pointed out that a mere 10% of companies across India employed a CRO to manage risks. Most employees in India Inc. expected the CFO (34%) or the CEO (21%) to be the man responsible for handling risk. He also spoke briefly about key techniques to managing risk and their possible downsides such as hedging (to reduce potential losses while also risking losing out on potential profit), insurance and diversification. The session got even more interactive when in his keynote address, Mr Rajendra Kumar Shreemal, VP and Corporate Treasurer at Wipro, spoke at length about ‘Currency risk management: practices and experiences’. He discussed the possible impact that forex volatility has on a company’s bottom line unless risk is carefully and systematically managed and argued in favour of hedging as an intelligent means of managing risk.

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!"#$%&'(!')# “The primary objective of hedging is to reduce the volatility in operating financial performance due to currency fluctuations and to enhance predictability,” he said. At Wipro, Shreemal said, he and his team concentrate on a well-researched hedging strategy. “It basically aims at reducing volatility through a blend of core hedging and dynamic hedging. We hedge for the forecasted cash flows, the net monetary assets at quarter ends and on the investments in the balance sheets,” he said. To make sure the system functions smoothly, he highlighted the need for an independent back office, clear limits for quantum of hedges for each category and audits at defined intervals to ensure policy and processes are being RAGHAV adhered to. SINGHAL, “We have daily and weekly meetings, JOINT GM AT ICICI BANK report to the audit committee and have GIVES THE a constant benchmarking system in WELCOME place for practices and against changADDRESS ing business needs,” he pointed out. AND (TOP) In conclusion, he argued that as THE PANEL DISCUSIndia’s share of global trade increases SION WITH there will be heightened exposure on ICICI BANK’S both revenue and capital and risk manSHILPA agers will have to play an increasingly KUMAR (R) important role, especially in businesses with razor-thin margins, where forex volatility could impact the very viability of the business. “An effective hedging policy and risk management will be more critical than ever before for stable performance of any firm,” he concluded. In the panel discussion that followed, Ms Shilpa Kumar, Head, global markets group, ICICI Bank, spoke of her experience with CFOs and corporate treasurers from India Inc. She agreed with Shreemal that hedging was often the best in risk management, which, in her experience, many small and medium companies in India would do well to understand. She spoke at length about how banks will play an increasingly significant role in risk management plans that companies draw up. However, she warned that despite bankers acting as advisers to risk officers and CFOs, ultimately the company (and the CFO/top management) will have to decide which strategy to follow. The bank could merely help make the decision easier. The session saw the participants, many of them representing the top management of their firms, asking questions on 46

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hedging strategies, on when to sell or use forwards or swaps as an option and on related issues. The session was moderated by Dhiman Chattopadhyay, managing editor, CFO India magazine and the vote of thanks was offered by Deepak Garg, executive director of the CFO Institute. Well after the discussions were formally over and the gathering headed for cocktails and dinner, all three speakers were seen engrossed in animated discussions with the participants. If the coffee before the session had ensured all participants were keyed up for the speeches and the discussion that followed, the cocktails and scrumptious dinner at the Sun-nSand had everyone going home happy and contented. It was an evening meaningfully spent for the 70-odd representatives of India Inc. and there were more than one request of hosting similar sessions in Pune in the near future.

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Pricevs

VALUE

How People Often Make the Wrong Choice

Learning about ‘value for money’ when your cheap backpack comes apart halfway up Mt Everest is not funny. David Lim

ABOUT THE AUTHOR David Lim, founder, Everest Motivation Team, is a leadership and negotiation coach, best-selling author and two-time Mt Everest expedition leader. He can be reached at his blog http://theasiannegotiator. wordpress.com, or david@ everestmotivation.com

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MANY PEOPLE ARE ONLY now, in my opinion, beginning to understand the difference between price and value. Since developing the Everest Motivation Team, my associates and I have worked with many companies in their buying decisions for team development. A common mindset I see is that many of us love a bargain so much that we fail to see that paying for value is often better in the long term. Worse, we constantly try to chip away at the price of something we already know will fulfill our needs. We have beer money, but demand champagne at the same price point. The result: we give up quality beer, to get bad sparkling wine instead. A costly, but timeless designer dress that you love wearing regularly is much better value than something you paid much less for, but maybe just wore once. You didn’t like the fabric or the way it hung on your frame. It remains in the darkest corners of your closet. The single most expensive piece of climbing equipment I ever bought was in 1997, a custom-built rucksack, that has since seen me through life-and-death struggles on 15 expeditions worldwide. And yet it has been the ‘best buy’ in my climbing career, outlasting and outperforming countless other pretenders. When we buy services, we should be looking at the outcome we want, and then see what we can do

!"#$"%&'()*%!$ to achieve the outcome. In corporate Asia, what happens often instead is that potential buyers come with a price in mind. They may focus on a workshop venue, meals, type of content and methodology, but are clueless about what they want as an outcome. They are focused on meals, activities and topics instead of an outcomes that makes a difference in the workplace. They have an order-taking, list-ticking mentality at best. When they decide on a ‘cheaper’ provider, the result is that their entire investment is often wasted because it didn’t quite achieve their outcome. Instead, if they had paid more for a solution that worked, the worst result would be that they had paid a bit more than they should have. But they received 100% of the result. How can this mindset be calibrated more effectively? Here are some points to takeaway when assessing the price vs value issue:

We have beer money, but demand champagne at the same price. The result: instead of quality beer, we get bad wine.

HOW IMPORTANT IS A SPECIFIC OUTCOME? The higher the importance, the more you should be looking at value rather than price. If two providers are offering similar propositions, but one is somewhat more expensive, perhaps you will need to establish the reasons for this. These may include top-notch references, testimonials, sustainable quality, past history, relationship and trust aspects.

STAY FLEXIBLE This includes having some leeway on financial budgets so you can obtain a far better value outcome by, at times, paying a bit more than you had planned.

ASK ASK ASK Asking questions about relative costs, labour, skill and uniqueness are all essential in determining if the premium you are paying is really worth it. A service, product or provider that relies too much on marketing and hype and far less on substance, is unlikely to do well in a less emotional environment such as B2B ventures and decisions. I am not saying emotion does not play a role. However, while we still like to do business with people we like, in a B2B environment, we tend to ask the tougher questions; less so in a B2C scenario where emotions play a bigger role.

BE REALISTIC Nothing was ever the cheapest and the best. And do not forget that the law of diminishing marginal returns applies. Getting

20% extra value from a whole array of everyday and corporate services often demands an additional investment of up to 100%. But if you are convinced about the impact and quality, then it may be worth paying extra. A classic example: cameras. For less than US$15, you can get a disposable camera to take party snapshots. But for something a bit better in terms of options, control and features, you would need to fork out around US$150.

EXAMPLES IN DAY-TO-DAY LIFE When you have a serious heart condition, do you ask people to find you the cheapest heart surgeon around? Every client of ours who said our fees were high apologised afterwards because of the tremendous value their staff obtained from the presentation. Again, price vs value is the issue here. One of the founders of modern Singapore rock-climbing, Lawrence Lee, gave me a piece of advice which is worth remembering even today: “Buy the best you can possibly afford.” Halfway up a mountain is no place to find out the meaning of quality. Tell that to my friend who ‘saved’ US$100 by buying a cheap backpack to see it fall apart on an expedition. The 1st Singapore Mt Everest expedition in 1998 which I led, cost over US $600,000. But the countless people who have been inspired by our own small mark in Singapore history, and have gone out to achieve their own dreams is what makes our expedition ‘valuable.’ Value remains long after you have forgotten what you paid for something. The great investor Warren Buffett described the price-value relationship best when he said “Price is what you pay, value is what you get.” SEPTEMBER 2010

CFO INDIA

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HONDA JAZZ X

Brand new Jazz-matazz!

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Anoop Chugh woos Juliet in the new Honda Jazz X as

he cruises down a scenic highway.

THERE’S NOTHING LIKE ADMIRING THE Aravali Hills behind a glass balcony on the picturesque Delhi-Jaipur highway (NH-8). It was still sometime before daylight would make its first appearance on the lush-green mountains overlooking the winding 6-lane road, inundated with torrential rains. I was safely tucked

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behind the wheel of the ‘updated’ Honda Jazz, now christened ‘Jazz X’. We all love the way Honda cars look – an aerodynamic bundle of joy and the Jazz X is no different. The frontseats could easily have been the balcony of a scene from ‘Romeo & Juliet’ (Scene II Capulet’s Orchard).

The five-door hatchback automobile is named ‘Fit’ in Japan, China, as well as in both North and South America. It is called the Jazz in Europe, the Middle East, SE Asia and India.

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#"&$'(()* Romeo jests at scars that never felt a wound. Juliet appears above at a window But, soft! what light through yonder window breaks? Is it the East, and Juliet is in the Jazz Apologies for killing the masterpiece. Well, blame the (panoramic) view from the front seats, which is overwhelmingly unobstructed and opens up at an extensive area in all possible directions. For once you start believing blind spots are a sham. The compact exterior of the car almost camouflages you to believe it is a small car, though inside you can host your bachelor’s party.

NOW, THE JAZZ COMES WITH BLUE BLACK INTERIORS, ALLOY WHEELS, USB PORT AND A PARCEL TRAY. IT’S A TRUE STYLE ICON

Design The car is designed to be a compact 5-door luxury hatch, but longish wheelbase and innovative design mean you get more space than the car promises from the outside. A small nose results in a refreshingly tidy turning radius (4.9m) relatively smaller than the other luxury hatches it competes with, say the Fabia (5.0m). But, when you look at it sideways, it appears lengthier than what the wheelbase (2500mm) suggests. That is the beauty of its design. The estate-like rear makes the Jazz ideal for long family weekend drives with plenty of space in the boot (353l vis-a-vis Fabia’s 315l) for bicycles, sleeping bags, collapsible tents, consoles and a complete drum kit. The rear ‘magic seats’ (with 60:40 split) includes an under seat tray to offer you additional storage. The fuel tank has been cleverly placed under the front seats (instead of the back), freeing up the back seats from any unnecessary intrusion. As a result the rear of the car can be converted into a 180 degree flat-bed (850 litres of space) by pressing two levers. Practicality is what the Jazz scores on. Despite being wiser-than-thou in designing the car’s interiors, the engineers couldn’t have devised a worse

'#"+,& -,..&/ Price

7.53lakh

Engine

1198cc

Max Power

90bhp

Max Torque Gear Box Wheelbase

110Nm 5speed MT 2500mm

Ground clearence 160mm Top speed Cylinders Fuel efficiency Turning circle 0-100kmph

180kmph four 15-16kmpl 4.9m 10.7sec

POSITIVES Stylish, spacious, new gadgetry, electric steering, fuel-efficient NEGATIVES Sluggish drive, underpowered on highways, poor reverse visibility, shaky over potholes, low ground clearance, manual ORVMs VERDICT We wish the Jazz could get some more power to match the capacious interiors and glamorous exteriors.

rear visibility. Probably, the car is supposed to be driven only in one direction. Among other negatives, the manual ORVMs (for a car priced as high as Rs 8 lakhs) is sinful, while the absence of vanity lights would rub the female buyers the wrong way. The car isn’t a low-seater (with 160mm of ground clearance) but still manages to scratch every bump on the road without a miss.

Performance & ride The least exciting bit about the car is the performance. In fact, the petrol engine has no flaws in it and probably, is the most refined and quiet piece of heart a car could have. The problem is of too small a heart for the size of the car. The Jazz has a 4-cylinder 1.2 litre i-VTEC engine, with each cylinder using 4valves generating 90 horsepower, same as that of an i20, or the Punto. For a hatch ‘90’ is an astounding figure, but the Jazz is a MUV at heart. When all seats are occupied and luggage neatly stuffed on a freeway, the car seems like an overloaded cart. Within the city though, the Jazz drives like a livewire, making right moves at the right time.

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The petite professional Sony Xperia Mini Pro reviewed

iPod touch Retina display– 960x640 pixels FaceTime video calling (front facing camera) HD video recording (back-facing camera) A4 chip 3-axis gyro Game Centre 40 hours of music playback and 7 hours of video on single battery charges Price: 8GB model - $229

iPod nano

THE MINI PRO is an attractive phone. What it lacks in dimensions, it makes up in curves and contours. Every part of this handset exudes quality – from the glossy black front to the rubber finish of the rear. Even the side-slide QWERTY keypad has a positive feel to it and the mechanism snaps solidly in place. Since the display is a mere 2.55-inches – small by touch screen standards, the bezel appears quite wide, especially the lower portion. The 3.5mm jack is at the top, close to the power button and Sony supplies a set of in-ear earphones. The accessories look good but there is nothing beyond a data cable and charger. Although running Android 1.6, which is pretty archaic considering there are at least two newer revisions around, one gets the feeling that the interface is well thought out, and optimised for such a tiny screen. The browser is slightly better than either the IE or Opera 52

CFO INDIA

SEPTEMBER 2010

Mini on the HD Mini. Although, it is a basic HTML browser with none of the goodies, regular browsing is a snap – text resizes to more readable levels, there is less interference when resizing text and fonts are easy on the eyes. The touch screen is fairly sensitive, and the interface is snappy. Music plays well but the battery life is not that great, and just two hours of talking saw our battery dip to less than 50 per cent. Charging daily is a mandatory affair. The XPERIA X10 Mini Pro is a nice device that straddles an interesting niche – someone who wants a compact touch-screen with a hardware QWERTY might look at this. Perhaps, the best thing going for the X10 Mini Pro is its price. Rs 16,000 doesn’t mean much for the features on offer. While, there are better Androidbased devices around, very few of them are similarly priced. Price: Rs 16,000

New multi-touch interface Half the size and weight of the previous generation Aluminum and glass body Built-in clip !Genius Mixes (iTunes style playlists) !24 hours of music playback on a single battery charge !

iPod shuffle

Clickable Ring buttons VoiceOver navigation technology All-aluminum enclosure body Built-in clip 15 hours of music playback on a single battery charge Genius Mixes (iTunes style playlists) Suggested price: 2GB model - $49

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The (Broken) Moon Walk Anoop Chugh drives down

the Silk Route to meet happy villagers, attend Korzok Festival and befriend monks

I HAD NEVER BEEN TOLD to drink so much water before. Three-litres a day. Leh is the one place where your kidney stone would dilute before it could seed itself. The capital of Ladakh is a lesson on how basic provisions in life carry a huge premium and should be respected and preserved – say oxygen, bed, water, airline seats, pizzas and clean loos. I had stocked most of it (sans airline seat and clean loo) on my road trip from Delhi to the Broken Moon, as Ladakh is popularly known. It was a few months before the catastrophic cloudburst would make airlines turn into black marketers. I decided to spend 24 hours on the road in an Audi Q7 to travel between New Delhi and Leh. The objective was clear – to rediscover the Silk Route. Not the dooba-dooba band, but the once legendary path for cultural and commercial exchange between China, India, Persia and the Mediterranean countries for almost 3,000 years. Sadly there’s barely anything silken about the Delhi-Chandigarh-Manali-Rohtang Pass-Keylong-Bara Lachha Pass-Upshi-Leh-exhaustion route. If you want to savour India’s Kargil victory you can take Delhi-Srinagar-Leh route via Kargil (Both routes are only accessible in the Indian summer). Once you reach Leh, and are still breathing, locals would advise you to get acclimatised first. In simple language that would mean sleep, drink (only water) and eat (anything not oily) for the first two days. Welcome to the Indian version of Springfield, where the sky is some unseen blue (for men) and turquoise (for women), oxygen is limited (blame 11,500+ feet altitude above sea level), monks are camera-friendly, hotel staff are a happy bunch, nature is abundant, Yaks still not extinct, weather switches between 30 degrees and 10 degrees on any given summer day, plastic bags are prohibited and God smokes weed. I was there for a purpose – to attend the two-day long Korzok Gustar festival, days of sacrifice. It includes a

THE ‘UNSEEN BLUE’ SKY, AND THE ‘TURQUOISE’ SEA ARE A TREAT TO WATCH MONASTERIES ARE A REGULAR SIGHT IN LEH AND LADAKH. LOOK OUT FOR THE MASKED CHAM DANCERS

regular sacrificial routine – an entire village assembles in a tennis court-sized monastery, lamas dance, play the trumpet (Dungchen) supported by bells and drums, masked chamdancers show their acrobatic skills (to ward off evil forces from nature), horses, goats and an odd fat yak get respect, butter and beer (sprinkled), followed by the famous Black Hat dance. One may find many excuses throughout the year to visit Ladakh, like Hemis Festival, Dosmoche festival, Losar festival, Sindhu Darshan, Harvest festival, Tak-Tok Festival or simply go there without any excuse. NEAREST AIRPORT: Leh (Limited airlines only) LUXURY STAY: Only 4-star hotel – Grand Dragon Ladakh Hotel BUDGET STAY: Ample tenting options or park your car near a cliff

and pull handbrakes. BY ROAD: Srinagar-Kargil-Leh or Manali-Leh SEPTEMBER 2010

CFO INDIA

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Momentary Dreams Young and restless Farah

Ahmed impresses with her collection of photographs that look like paintings

By Anoop Chugh

Farah was born and brought up in Bangalore. She went to Northwestern University in Chicago, USA, where she initially studied Law and Journalism. Unable to resist art, however, she graduated in Art Theory and Practice. She has her unique style of capturing pictures in a way that smudges the line between painting and photography. Farah lives and works in Bangalore. Her present collection, Fluid Forms, is being sold in the range of Rs 7000- Rs75,000. All photographs are reprinted on canvas.

CFO INDIA

FLUID FORMS IS THE latest deception used by Farah Ahmed, an abstract photographer. It deceives you into believing it’s not a photograph but an outcome of brush strokes on canvas. Through her camera, she has tried to draw recognisable yet seemingly unknown silhouettes. She has captured familiar natural shapes and sights around us, which we tend to ignore. The inimitable blend of peculiarity and familiarity in every photograph makes it a unique collection. One could actually define her work as a bridge between Alfred Stieglitz and Monet or Ansel Adams and Seurat. Not completely departing from her earlier style of the abstract expressionist, Ahmed has used textures, surfaces, and splashes of colour as her subject matter. She had previously kept herself away from incarcerating the clichéd and overdone landscape, but this time she has incorporated the scenery in her frame without losing out on abstract expression. As a result, she has been able to arrest the ephemeral simplicities of nature. Say, a reflection of the Taj Mahal in water portraying it to be a lucid white structure fading away in fumes. Most photographs in her collection are not titled, keeping them open for an admirer’s imagination. The series is dominated by earthy tones and pastels, lending a more solemn sensibility to the works. It renders an illusionary land where water is not merely water but a mirror. Her

SEPTEMBER 2010

A REFLECTION OF THE TAJ MAHAL IN WATER PORTRAYING IT TO BE A LUCID WHITE STRUCTURE FADING AWAY IN FUMES

painting-like photographs reflect the conceited world reflected through ripples in still water. While these might be unlike her previous collection, one can see the obvious inspiration from the impressionist era that is given away by the obscured nature of the work. Truly, the inspiration behind ‘Fluid Forms’ seems to stem from a basic love for nature. How often do we acknowledge a tree gazing into a pool of water, almost surprised by its own image, or a cloud slowly passing by a quiet lake blushing at its image? Such momentary simplicities have been highlighted by Ahmed in her photographs. One can see the damp earth, the playful water, the profound trees and the notorious clouds flirtatiously communicating with one another. Sounds poetic, but the photographs evoke the dreamer in you to see beyond the obvious – gaze at the natural shapes playing their own games, not visible to the naked eye at first. Conspicuous by their absence are living beings in her pictures. Perhaps, the artist only wanted nature to talk while humans take the backseat for the time being. The pictures also depict the photographer’s need for solitude. ‘Fluid Form’ brings forth nature’s ephemeral role in our lives. Wish it wasn’t so momentary.

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The great fall Ahamed’s book is an account of the futile attempts of bankers leading to the great depression By Anoop Chugh

Retire Rich-Invest Looking forward to be financially free? Worried about retirement? Curious if you can maintain your lifestyle thereafter? In Retire Rich (at Rs 40 a day), author P V Subramanyam tells you why you need to plan for retirement even if you are 25 years away from it, the options available and how to retire happy. You would wish you had read the book when you were 22. It is never too late to pick up a copy. Great if you are still 22.

Publisher: Network 18 Publications Author: PV Subramanyam Price: Rs 399

#/TSV'VSPSKUSU THERE’S AN OLD SAYING, “When nothing else works, blame the bankers.” It holds true especially in the age of a downward spiral, recession and economic stagnation. After the collapse of a few iconic banks in 2008, we have adulated anyone who has written against ‘greedy bankers’, the new villains for professionals who have seen salary cuts, rising prices and job insecurity thanks to ill-judged decisions to grant money to anyone trespassing the bank. Banking on this wave, Liaquat Ahamed, who is ironically a banker himself, has come out with Lords of Finance, which looks at the collapse of the world economy between 1929-1933. What sets this book apart is the approach to the issue. The author has chosen to tell the story of bankruptcy, unemployment and inflation in the 30s by looking over the shoulders of men in charge (during that time) of the four principal central banks of the world: the Bank of England, the Federal Reserve System, the Reichsbank, and the Banque de France. The story of the world’s most powerful nations in ruins with their economies saddled with debt, population impoverished by rising prices, and their currency collapsing would easily qualify as a riveting script for the next Quentin Tarantino blockbuster.

Publisher: William Heinemann Author: Liaquat Ahamed Price: Rs 1199 56

CFO INDIA

SEPTEMBER 2010

Tata: The Evolution of a Corporate Brand A SERIES OF HIGH-PROFILE acquisitions, including Jaguar Land Rover and Corus Steel, together with the launch of the Nano, is set to change our perception of one of India’s oldest corporate brands. Tata now stands 65th in the world brand valuation league, on the threshold of becoming a truly global brand. But what is the Tata brand all about? What are its values? How do people perceive it, in India and around the world? Find out.

Absolute Khushwant IN THIS BOOK, India’s grand old man tells us about his life, his loves and his work. He writes on happiness, faith and honesty. And, for the first time, about his successes and failures, his strengths and weaknesses. He tells us what makes him tick and the secret of his longevity; he confesses his fears and what he holds dear. He writes about sex, marriage and death; people he’s admired and detested.