19 Mar 2015 19:53 IST

Indian firms need to set higher performance standards

MCI India scores suggest a mismatch between capabilities and aspirations

AIMA recently released the overall Management Capability Index (MCI) India scores, in association with KPMG. India Inc seems to be on the back-foot as compared to previous years going by the report.

The overall MCI score for India has dropped by seven points from 77.8 in 2011 to 70.8 in 2014. Drop in ‘organisation results and comparative performance’ scores was considerable, from 77.6 in 2011 to 66.5 this year. The drop could be due to mismatched aspirations, according to Nishchae Suri, author of the MCI 2014 report.

“Our capabilities have not matched our aspirations. Companies set roles, and after a lag, start building capabilities,” says Suri. “But the industry has not focused on building the right kind of capabilities, technology, and the set of rules for organisational success.”

One contributing factor for lower scores could be slow economic growth, according to Anil Sachdev, Founder and CEO, School Of Inspired Leadership (SOIL).

“India has recently gone through a difficult market environment, which set companies’ focus on short-term goals,” says Sachdev. “In a growth economy, companies can learn from hits and misses and recover, but in difficult times they tend to focus more on short-term performance.”

Performance matters

Schneider Electric has a robust performance tracking system to measure the company’s comparative performance. “We rely on digitisation for real-time track on competitors; quarterly monitoring of results and yearly estimation of the entire market form the basis of our measurement framework,” says Brajesh Chhibber, General Manager, Strategy, Schneider Electric, India.

Taking the lead

Leadership is the second most important factor according to Suri of KPMG. “Other growth indicators within an organisation may be determined by the progress of the people leadership parameter,” he says.

A three-year old e-commerce software management firm, Unicommerce, agrees. “Performance leadership (10 per cent weightage) and people leadership (10 per cent) are most important to boost our management capabilities,” says Ankit Pruthi, Co-founder & CEO, Unicommerce. The MCI score for People Leadership dropped from 74.9 (2011) to 68 (2014). Currently, industry faces a leadership crunch both on account of quality and quantity,” says Suri.

Sachdev suggests a way out, “Multiple-scenario-planning based on demand for talent may come up in future.”

“Companies also need to invest in creating opportunities that will allow people to grow their talent within the company,” he adds.

Only 50 per cent of the leaders who surveyed the report agreed that their organisation adequately emphasised people strategy and planning.

The MCI score for foreign firms with India operations fell marginally from 78.5 in 2011 to 75.4 in 2014; they have, however, evolved. Processes are streamlined and decision- making has become analytics driven.

Smaller India-based firms (who scored 69.2 and 68 in 2011 and 2014 respectively) are writing their own rules when it comes to boosting performance and management capabilities; continuous learning, putting people out of their comfort zones, and stretching goals have worked for Unicommerce, according to Pruthi.

“It's the mindset that we expect from our management layer that makes the difference,” he says.

The 70:20:10 principle

“Culture has to be such that it embodies all the values and the mission of the organisation,” Pruthi adds. “At the same time, it has to give enough space for different people to contribute meaningfully.” Sachdev of SOIL suggests the 70:20:10 principle of capability building to make organisations more robust.

For capability building, about 70 per cent of the time should be spent on creating the right experience for the people, according to him.

Giving assignments, projects and cross-functional rotations will boost the people performance of a company. Next step is to set aside 20 per cent of the time for mentoring . Ten per cent of the time must be spent in structured training i.e. time spent in classrooms.

Sachdev says, “In a difficult market situation, organisations lack the bandwidth to take new initiatives and therefore, don't emphasise projects which involve multiple people.”

Some of the other parameters that determine MCI India include Strategic Leadership, Performance Leadership, Financial Management and Innovation. The weightage for these parameters was 10 per cent each.

Organisation Capability, Application of Technology and Knowledge, External Relationships, Integrity and Corporate Governance were given a weightage of 5 per cent each.

More than 500 senior and mid-management personnel participated in the AIMA KPMG MCI India 2014 survey that included a set of 50 statements across 10 dimensions.

The respondents were asked to rate these statements on a 6-point Likert scale (a scale used to represent people's attitudes to a topic). The scores for each statement were calculated on a scale of 0 to 5 and consolidated for each dimension, and finally converted to the 100 per cent index.

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