Shashi Rajagopalan: A Personal Essay

Shashi Rekha Rajagopalan, member of the Central Board of Reserve Bank of India, and NABARD and also a member of the Malegam Committee on MFIs, passed away on the 5^th of August 2011. She had just crossed 60. I got to know Shashi as a young student from IRMA who had gone to do a summer project in Samakhya, where she was the Director. For somebody who was encountering an experience within work environment, quite different from the carefree student life, it was indeed a welcome way of transitioning. Me and my batchmate Shankar Raman had a briefing in the head office of Samakhya and then we travelled by train to Kazipet from where we would go to a village called Mulukanoor. Shashi accompanied us on that trip.

This was not my first outing in the village. I had already spent near to about 10 weeks in a village near Mysore, doing fieldwork. Compared to that village Kalale, Mulukanoor was much better. We were given two individual rooms on either sides of a godown. The room was decently furnished – a table, chair a bed and a functioning fan and geyser. The food was from a nearby hotel, which opened in the morning and would continue to function till about sun-down – or till milk lasted whichever was earlier. In the evening the co-op campus would close the large gates and it was indeed an eerie experience to be in such a large space alone.

However, as Shashi had briefed us, we had come there with a purpose. There was this efficient co-operative in Mulukanoor that took care of all the needs of its members and we were expected to do a costing system to understand the profitability of each of the lines of business. I was quite excited being in such a place and experiencing all the newness of being in a serene environment, with the added bonus of basic necessities taken care of. There were two theatres – one somewhat Kaccha with a single projector and another a fancy one by Mulukanoor’s standards – where the typist of the co-op was a ticket dispenser. In both the places seeing the movie was an experience in itself.

Shashi in her briefing had told us some basic non-negotiables. That we have to respect the views of the local co-operative employees and not talk down to them, keep to our appointments and generally be seen as responsible people. She also introduced us to Mr.A K Vishwanatha Reddy the President of the co-operative and almost a patriarch of the village [it did not matter that he never won an election beyond the Zilla Panchayat, but he had also never lost an election of the co-operative]. While one found Shashi to be overbearing, she also had an innate sense of humor, which diffused any misgivings one might have had. We knew that we could take some liberties with her we also knew where she drew the line. There was never any confusion on her expectation from us.

At the end, after several interim trips to Hyderabad to present the progress of our work, we were done with the project. There was a warm farewell for us, and the office gifted both of us a book each [Managers of Tomorrow for me]. I suppose I must have given the impression that I was the hardworking of the two, though there was no such reason. Shankar’s parents were in Hyderabad and he would go off to the city every weekend, while I, having nothing to do in Hyderabad would stay back in Mulukanoor and be happy with the Telugu movies in the touring talkies.

I took an instant liking for Shashi and Samakhya basically because of the general work ethic that the organization showed. She was accessible, willing to pick up an argument and also tell me clearly what she approved of and what she did not. There were no two guesses there. Mr. M Rama Reddy, the secretary of Samakhya, the super-boss was an enigma. He never spoke much, and it appeared that Shashi was in charge of the day-to-day operations and only she and a handful of others reported to him. She would be the face of Samakhya in all public forums – the funders, the visitors and the government. Shashi and Rama Reddy seemed to enjoy a good working relationship, but we would often find her arguing with him as well.

When I got back to Anand after the project, I remained in touch with Shashi. During those days, I used to write letters and keep in touch with people much after the engagement was over. There was nothing deep in this practice, but I somehow felt the need to remain “linked in”. In case of Samakhya, it was also more than just being linked in, but also possibly wanting to work there. Fancying myself as a writer of fiction in Kannada, I thought this organization would not only provide me the necessary exposure to rural India, but also give me “plots” for my stories. Being a small organization, and I having a management degree, I fancied that I would be a part of the senior management soon. So I did write a letter of thank you to Shashi, but was really surprised to get a nice letter from her, appreciating the work we had done. Not only was the work appreciated, a shorter version of the report was published by them with illustrations from a brilliant artist, Karunakar who was working with Samakhya during those days. The icing on the cake was that the report was also translated into Telugu and later used in some of their training programmes as well. This was sufficient for us, as upstart students to be on cloud 9.

At the end of the stint at IRMA, it was placement season and Samakhya was listed to interview us on the first day. I took the interview, and in the evening Shashi called me in to tell me that I was selected. Having taken the interview of two other jobs that day, I had the luxury of three job offers. One was in Karnataka Milk Federation based in Bangalore – my hometown, another in NDDB, in Anand. Something in me told me that I should go and join Samakhya in Hyderabad, even though that was paying me the least. I did not regret that decision.

The two years I spent at Samakhya was quite exciting. During those days, we were replicating the Mulukanoor model in other co-operatives. That meant that, we were helping the primary agricultural co-operatives to become like Mulukanoor – a multipurpose co-operative. The model was that every co-operative offered credit, input supply, technical advise/equipment hiring, marketing of output, consumer and welfare services. In addition, these co-operatives were to be trained in book keeping, internal audit, planning, governance. Each of these training programmes had a non-negotiable component of teaching in detail the co-operative principles. My baptism to the concept of co-operation happened through such hands-on training and capacity building programmes. In addition we used to fill up a checklist of things when we went to each co-operative – things like does if have a sign board, does it have its own office, telephone connection, was the general body held within three months of closure of the year, was the annual report printed etc., which basically looked at internal management of the co-operative. A lot of this detail was usually looked into by Shashi – the success of a co-operative not only was in the big picture of governance and planning, but also in the smaller details of housekeeping. How important it was to straddle both the worlds. This could happen only because of the thought given to the intervention by somebody as insightful as her.

Somewhere down the line, I was inducted into a new exciting project of Samakhya. This project was an ambitious project of strengthening the co-operatives along the command area of the Sriramsagar Project. A dam was built at Pochampad on the river Godavari and distributory canals were under construction. The idea was that by the time water from the project came to Karimnagar and Warangal districts, the co-ops would be strong enough to absorb the changing cropping pattern [from maize to paddy] and set up their own rice mills so that the farmers could get a better realization. They had also planned a federation that would process by-products and co-ordinate the levy and market information aspects. This was a project of mammoth scale that was not seen by Samakhya earlier. AF Ferguson was hired to do the feasibility report and based on the report, I along with a colleague Krishna Kumar were assigned to gather more data to operationalize the dream. For me personally, this was a project of a mammoth scale, which had the potential of doing an Amul on the paddy-rice sector. Naturally I was quite excited. However, disappointment was to follow soon.

In the run up to the assembly elections I had seen the iconic NT Rama Rao come on his famous ‘Chaitanya Ratham’ to Mulukanoor, when I was doing my project. The speech that he gave at the ZP School premises was not only full of drama, but was equally moving. He had talked about the pride of Telugus and how Delhi was humiliating the aspirations of the local people. By the time I joined Samakhya NTR had won the election and become the Chief Minister. One of the early decisions that the NTR government took was to supersede the boards of all the primary co-operatives – a usual tactic used by many a political party to gain control over grassroots organisations. Possibly NTR’s icon, MGR had already done this in Tamil Nadu, which was famous for co-operatives run by government.

However, this move affected CDF significantly. Suddenly I found Shashi and Rama Reddy abandoning the work that we were doing on the paddy co-operative federation. Their argument was that these co-ops were no longer co-ops because they were run by government administrators, and until the basic democratic nature of these entities were restored; we should not work with them. My argument was that, by the time we fight the battle and come back to this constructive work, it might be too late. Water would have flown and the districts would be dotted by private mills. That has partly happened in Warangal and it would happen in Karimnagar as well. It was frustrating to see the work we had done during the past months come to a nought.

However Shashi and Rama Reddy vehemently believed that this was the time for protest and litigation. The office started looking like a war room with district level strategies being drawn up for street protests, advocacy and lobbying. In addition Samakhya also took the route of litigation by challenging the supersession in the court. For a young professional trained in Management, this looked too impractical and too ideological a position. However, I could do nothing but sulk. That was the time I think I had deep differences with what Samakhya was doing as well as with Shashi, and my reaction went to the extent of writing a letter to the editor of Eenadu against an article written by Mr. EV Rami Reddy, the then President of Samakhya. Hell broke loose after this, because Shashi was not happy with what I had done. My own frustration in the organization grew and it was time to leave.

I quit, and while we had fundamental differences, the parting was good. It takes a great deal of maturity for Shashi to have the magnanimity to respect my views on the strategic directions that the organization should have taken. She did tell me that she often found me arrogant, and that was the feedback from the co-ops as well – that he is good, sharp, but a bit too full of himself. The sense of self-righteousness that I had as an upstart was something that could have been curbed by an intolerant boss, but Shashi was made of different material. She allowed me the freedom of expression but finally called the shots. It is to her credit and her magnanimity that I enjoyed a good relationship with her and Samakhya many years after I quit.

While I went on to join IIM Bangalore for my doctoral work, the initial seeds that Shashi and Rama Reddy had sown in my about the co-operative sector continued and I ended up doing my thesis on co-operatives, and went back to the same co-ops with whom I had worked for data collection. Shashi was magnanimous enough to give me office space, put a computer at my disposal and allow me to use their facilities when I was doing my data collection, including an occasional ride in their vehicle if I were to go in the same direction.

Eversince, I have been in touch with Shashi and Samakhya. I watched the metamorphosis of the organization from Samakhya to Cooperative Development Foundation, from an organization that evangelically believed in the multipurpose co-operative model to an organization that excelled in advocacy and moved to promoting single purpose co-operatives. I also watched the next generation of professionals pass through the organization. I was engaged with them off and on including on a small consulting project on doing their accounting manual for the paddy and thrift co-operatives sometime in 2000.

In the later years I watched her take CDF on a dual path of [a] advocacy for a better co-operative legislation that honour the principles of co-operatives; and [b] working with structures that followed the co-operative principles but not necessarily incorporated as co-operatives. As a result of intense work on the co-operative law – a work that started in 1983-84 they were able to pull through an enactment in the state of AP, which gave genuine co-operatives a chance. A decade of work with the AP Government of conducting workshops, educating bureaucrats, engaging with elected legislators and using the press led to the passing of the seminal AP Mutually Aided Co-operative Societies’ Act, a legislation that respects the autonomy of co-operatives and the co-operative principles. [The civil society members working on the Lok Pal Bill must possibly pick a lesson or two in the modes of engagement from the experience of CDF]. Ironically the new legislation was passed under the same NT Rama Rao, who triggered the advocacy work of CDF by assaulting the democratic nature of the cooperatives. The new Act provided a framework for Shashi to work with the womens’ thrift groups to organize them under the new act. In addition, the unfinished agenda was also to get such Acts passed in different states across the country.

During this phase of CDF’s work I saw one more face of Shashi, which for me was an enduring picture. While she and Rama Reddy worked relentlessly for the for the new legislation, right from drafting an alternate legislation to the advocacy, the face of this entire effort was a Co-operative Initiatives Panel headed by Dr.Kurien, with Mohan Dharia and LC Jain as members. Shashi and Rama Reddy who were very adept at reading and interpreting laws [though not trained in law] kept a very low profile and did not even claim credit for the work. They were happy shedding the spotlight on the luminaries.

When I look back, it appears that the choice of abandoning the Paddy Federation in favour of fighting for legislation was indeed a correct decision. This was not only practical given their capabilities at that time, but also gave them the moral high ground to say that they stuck to the principles at all times. CDF at that time did not have the management bandwidth to pull off something on the scale of a large federation in the classic Kurien style. However, being non-compromising on principles, it was possible for them to doggedly work for change of laws, while continuing their grassroots work in the two chosen districts of Telangana region.

In the last phase of her career, Shashi withdrew from CDF and evolved as a person who worked equally effectively as an independent consultant. The growing differences with Rama Reddy had made her position in CDF difficult. For long she was the face of CDF – being articulate and aggressive. However, there was a growing sense that CDF had achieved its purpose. Indeed today as a reflection of this, the entire management of CDF has been handed over to the community who run it from Warangal without the involvement of any of the English-speaking professionals.

After Shashi quit CDF, we were more in touch, essentially because there would be an occasion to meet outside of Hyderabad as well. In addition, she was on a wider canvas and we had many more things to share. I remember that once she quit CDF, she started sending in her personal annual report, a delightful read on the assignments she had undertaken, the reasons why she undertook some assignments and her own take on how the year had progressed. Her transparency went to the extreme of her sharing her accounts with the readers as well. I did try to emulate this when I got out of employment about a year and a half ago, but it has been a tough act to follow. It is not easy to tell to others, let alone justify to oneself as to why one is doing some assignments, and how well it is progressing. The process of introspection and then sharing this with the outer world is so complex that my failed attempts at writing my own annual report made me appreciate her annual reports even more.

Shashi was a fiercely independent person, usually making a point by vehemently arguing for it, but also demonstrating it in life. Sometimes she was outspoken to the extent of being rude. In training programmes, she would embarrass Bank Managers who came in late by making the entire room clap in celebration of the late arrival of the “royalty”. In spite of this she would emerge as a favourite at the end of the programme, which she achieved through a great sense of empathy and by connecting with that person immediately and putting every person at ease. She had learnt not only to speak Telugu, but could effectively put together training manuals.

Shashi continued to work with small organisations and in the spirit of transparency that she always espoused. In the last few years, she was suffering from cancer, but refused treatment. Her research had shown her that in 90% of the cases the harm that the treatment did to the body was greater than the relief it gave. I wondered if this was a right decision for her. But never questioned her, nor brought up this issue with her, because I knew that she would have had a much stronger reason to take that path, than what I could suggest. She battled pain but was up on her feet till the last moment, trying to keep her faculties alive and lead a fiercely independent and professional life.

Shashi as a person was a full time professional. She remained unmarried and insisted that her parents be with her. She juggled between her travel schedules, her mother who needed full time caring with a sense of joy and righteousness. She constantly had this inner urge to prove that there were no gender differences – insisting on taking to the wheel on a huge Standard 20 or the organisation’s Jeep while she made the driver sit at the back. She was a person who loved to build conspiracy theories. Her favourite was a theory that anybody who put on too much of weight had turned corrupt! However, none of these came in the way of her professional engagement.

Of course, the most enduring memory of Shashi was when she had invited us all for a get-to-gather on the occasion of her 60^th birthday in late July. It was one of the most gracious events that I attended, with Shashi full of life, eating a full meal and delivering a great thankyou speech to all her friends whom she valued very much. When I heard her passing away 10 days later, this was the picture that emerged and got etched in my memory. It was as if she was waiting for this occasion to bid all of us a goodbye.

If Shashi is not as well known as her counterparts and has not been honoured with the usual Padmas and the Magasasays it is because she worked as a loner, worked for effect rather than publicity, was happy to be in the background when others celebrated success of her work as their own. It was not that she did not enjoy the spotlight, it was just that she did not work for it. If she is unsung and unheard of today in the sarkari co-operative circles, it is just because she worked more for principles than for structures. In losing her we have lost one of the best advocates for the spirit of co-operatives. And in her I have lost somebody would be my talisman on the correctness of a decision. When I heard that she was no more, I wrote to some of my batchmates: In knowing her I had gained a tough boss with whom you could argue, fight and still smile. In her death I have lost a mentor, guide and a dear friend.

I still feel her presence…. she is somewhere around. Possibly this is what I could call the spirit of Shashi. That spirit is with me!

‘Practice’ to Theory: The Evolution of Strategy

[A shorter version of this review was published in Business Standard]

The Lords of Strategy [The Secret Intellectual History of the New Corporate World]

Walter Kiechel III

Harvard Business Press, 2010

pp.347. Price Rs.995.

Writing a book on history of business is not a fancy that many have taken to. This is not glamorous for academics as it does not fetch much visibility and consulting opportunities. Therefore to find a well-researched and well-written book on history of strategy is refreshing. The book also gives a flavor of the overarching themes that the corporate world was engaged in the last five decades. Having picked the theme, how does one make it interesting for the reader? This is possibly the fundamental difference between a seasoned journalist and an academic. Kiechel makes the book engaging with remarkable aplomb.

The first aspect in getting this across is to make it personal, replace references with anecdotes, remove painful footnotes, and use a simple and straight language. He weaves the strategy story around four personalities and their organisations. This is the style that Michael Lewis adopted in his recent book The Big Short which was about financial sector crisis. Three of the personalities Kiechel talks about are with consulting practices and the fourth is located in the Mecca of business – Harvard.

What hits us hard in this book is that the frontier contribution about business came neither from cutting edge innovative businesses themselves nor from the academics putting out their grand models. This is a story of somebody in-between – in the consulting practice – having to constantly remain in business and thus show results for the theorization and at the same time not having the pressures of having to publish esoteric stuff in ‘A’ category academic journals – desperately seeking tenure. History indicates that consulting firms were not translating models handed out by the academics into action. Instead, they were reinventing themselves to remain relevant, pushing practice and building models around that. They were putting ideas across in their own pamphlets not waiting for an academic endorsement.

While understanding costs, and assuming that experience of working in a particular product will drive down costs, got the honorable status of a strategy, it is also some sort of dark humor that the period of ascent of strategy [driven by the understanding of cost data] coincided with the loss of cost and management accounting as a discipline in the academic world, particularly with the accounting fraternity. Over a period of time costing and control systems have actually shrunk in terms of popularity and offering in the core in MBA curricula!Through the stories of the lords of Strategy Bruce Henderson of BCG, Bill Bain of Bain& Co, Fred Gluck of McKinsey and Michael Porter of HBS, Kiechel takes us through the evolution of the thought, how strategy was conceived to be different from the annual planning exercise and how it fundamentally changed how corporations looked at their business following a single pursuit: how do we carry on and grow the business with greatest amount of efficiency. The paradigmatic shift that occured in the first phase of strategy – though articulated as obsession with costs/efficiency and a riding on the experience curve, in spirit it the shift was actually towards organized use of data as a competitive weapon.

Given that consultants as a class are usually seen with disdain, somebody parasitic who live off the clients – as caricatured brilliantly in Sidin Vadukut’s recent book Dork, this book not only debunks the myth and demonstrates how the consulting firms, led by Henderson pushed the frontiers to build the theory. Even in the section where Michael Porter is featured, Kiechel reveals how it took time for Porter had to face resistance to establish himself as an insider in the erstwhile Business Policy course in HBS and get his ideas through.

While BCG used this in the growth share matrix to place the entire portfolio of a corporation in a measurable and actionable format – holding a mirror to the corporation, Bain took it further where not only the mirror was held, but also offer a customized implementable solution – the mirror being an instrument in a beauty parlour. It is interesting to note that the early version of the growth share matrix was expressed in the form of financial service products – bond for the celebrated cash cow, savings account for the star, mortgage for the dog and wildcat for the question mark [p.58]. The growth-share matrix that emerged was a killer idea that continued to evolve.

The ultimate endorsement for the cutting edge work in strategy evolved by the early practitioners came as the academic world embraced the models with BCG Matrix, McKinsey’s 9 Box matrix and even Tom Peters’ and Waterman’s 7S model, all finding place in the academic curriculum at some point or the other with all seriousness and rigour, being applied to case analysis and discussions.

While the book traces the quirks in the four dominant personalities and how they went about their business, it also traces the dominant paradigms of management thought in the past half century. We can see the movement from using data to understand costs, gaining efficiency [translated as reduced costs, and a competitive weapon to win more customers], to the consultants delivering measurable value [Bain], to benchmarking performance with the stock market. Once Kiechel is through with the four towering personalities, he then quickly deals with the others who come in and disappear on the horizon – personalities like Tom Peters, Waterman, Prahalad, Hamel, Mintzberg, Senge and so on. The fact that what they propounded does not engage the attention of either the reader or the author might be because of the fact that none of these formulations seem to have withstood the test of time.

The larger set of questions that the book subtly raises are about the relevance of consultants and the models they propounded in the context of the new era where businesses are run on a different set of rules. Kiechel engages with two issues that the personalities did not consider in their formulations. The role of capital and the role of people. While the BCG matrix propounded that the cash cows will fund the stars and the question marks, the effective means of raising external capital for even more accelerated growth was not fitted into the matrix. Same is the case with people oriented strategy. While the consulting firms themselves seem to have had a people oriented strategy [ultimately the assets of the consulting firm were taking the next elevator], this was possibly not adequately transferred to the clients. With these perspectives coming, the corporate world looks more complex.

The decade of 90s laid excessive focus on the capital structuring of the corporate. With the maturity of the stock markets, complex instruments coming in, the retail investor edged out through complex considerations that left the spreadsheet specialists to act on behalf of both the informed investor [wealth management?] and the lay investor [mutual funds] there was an increasing decoupling between the entrepreneur and the supplier of capital. If we look at the earlier decades, while the basic model was to have all the factor providers as fixed pay off agents and the suppliers of capital being eligible for all the residual claims. The underlying assumption was that risk capital came bundled with entrepreneurship. However, with leveraged buy outs, private equity and venture financing gaining more currency, we find that the suppliers of capital and the entrepreneurs were decoupled. The entrepreneurs [who possibly did not have their own capital, but had capability and ideas] getting compensated not only through a fixed pay offs [managerial compensation], but were compensated through sweat equity and other sophisticated instruments that gave them a share in the upside of the business. This business model moves the primacy away from capital towards ideas. These ideas seem to work faster, quicker and in more concrete terms in non-capital intensive services sector. Thus none of the models propogated by the four towers was appropriate.

The second fundamental change was that the business itself being fungible. Divisions could be sold, chopped and peddled. A company like Dell could be termed to be in the business of selling computers, but basically could be a logistics firm. A company like Proctor and Gamble may aim to increasingly “outsource” its product development [p.323]. This fundamentally changes the way we look at a corporate and its function. In this changed environment, would the consulting practice be in formulating models or the core would be redefined as facilitating deals? From the days of Hendersen where the function was in pushing the froniters of how businesses to run to being a part of the ‘conspiracy’ in deal making the role had fundamentally changed. Not only do the firms get entrenched in the internal workings, but also consider “regulatory capture” as a valid approach to taking businesses to the next frontier. Take this passage from the book:

“The Firm’s ability to insinuate itself into local elites drives its competitors slightly berserk with envy. In their eyes, McKinsey partners seeking to open a new office arrive in town bearing letters of introduction to the local corporate gentry from their counterparts elsewhere, satisfied clients typically. Somehow, given their backgrounds and polish, the partners are soon invited to join the most exclusive clubs. They play golf in such environs. They being holding small dinners, perhaps at the club, perhaps in their swank homes – just a few congenial people like yourself, to kick around some issues we may have in common. They become active in local not-for-profits, almost certainly at the board level. And mysteriously, the son or daughter of a local corporate chieftain, attending business school far away, may find his or her interest in joining the Firm as a junior consultant heartily reciprocated.”[p.258]

The consulting practice that gave us a new paradigm in management thought now gets business possibly not through a superior thought process but through a process of “networking”. Suddenly Sidin’s book no longer looks like a spoof.

In a way [and possibly rightly so] Kiechel remains loyal to the four personalities who lord over the book and not to the firms that they set up or headed. He does discuss their successors – both the persons and the ideas but does not seem to be bullish about these being lasting. He does talk about the concept of the raison-d’etre for a corporation to exist through two quotes:

‘I’m saddened and offended by the idea that companies exist to enrich their owners. That is the very least of their roles; they are far more worthy, more honourable, and more important than that.’ [Michael Hammer, p.323]

‘On the fact of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy. Your main constituencies are your employees, your customers, and your products.’ [Jack Welch, p.324]

In the process of moving from manufacturing set up where the basic concepts of strategy emerged, towards a dominant service sector, we have seen the horizons shrink. The service industry has lesser capital deployment, works on the power of intellect, has lesser entry barriers both in terms of capital and infrastructure. The ideas are emerging from that paradigm.

However, we have to realize that the logic of a service industry. The service delivery cycles produces results that are not only measurable but also quick, thereby shrinking the business horizons. When ideas that emanate from the service industry with shorter horizons are employed on more fundamental businesses like power generation and distribution, the result will be Enron. This is the danger that Kiechel alludes to when he discusses the role of strategy in the light of the global financial crisis. He leaves us with a pessimistic note on the role of strategy in future. Clearly as a person who is documenting the history of strategy he possibly is not into theorization himself. But when we think what this book tells us – it is the shrinking horizons of the corporation and the resultant behavior to convert as much into measurable cash as possible. In this situation both Hammer and Welch [quoted above] look horribly outdated. However, what they said is possibly more relevant and current than ever before.

All in all I found this book to be a delightful read, thought provoking, and written with a journalistic flair that escapes the traps of an abstracting academic. It is time for us to pause, re-look at the four towers [Charminar!] that shaped strategy and see if the logic of how they were doing their work is still relevant, albeit in a different context. We certainly do not want the comic Sidin to be prophetic and prescient.

Practice and Theory: The Unexpected QUESTions to Vikram Akula

[A Shorter version of this review was published in Business Standard, 09 December 2010]

A Fistful of Rice: My Unexpected Quest to End Poverty Through Profitability

Vikram Akula

Harvard Business Review Press, 2011

pp.191. Price Rs.495.

[With a bonus reference to Assessing Microfinance: An Investigation of Whether Microfinance Reaches the Very Poor, by Vikram Akula, PhD Dissertation submitted to University of Chicago in 2004]

This is not the best of the times to be writing about Vikram Akula’s book. He is still hanging on a roller coaster that he got on to in 1998 and has seen the world turn topsy-turvy around him. For somebody who has been living life of a celebrity for the past few years, the party was planned well: There was a blockbuster IPO, the quiet period had ended and with business processes well in place, he would have moved on a book promotional tour before differences arose with his CEO Suresh Gurumani [whom he acknowledges rather warmly in the book] leading to Gurumani’s sacking and the regulatory cyclone hit the state of Andhra Pradesh, where his operations were concentrated.

While one could argue about the ideological position that Vikram takes in the book about how best to serve the poor, it would be very unfair to use his story to make a case against the model of microfinance he practices. However, what would be of interest to us is how this thought process evolved in Vikram’s life. Why does he call his quest as “unexpected”, if that was what he believed in right from the beginning? For somebody who says “I bought a one-way plane ticket to Hyderabad and packed a single gym bag with clothes. I wanted to travel like Mahatma Gandhi – no unnecessary attachments, no excess material goods….” [p.20], to a recent interview where he says.. . "I've made a tonne of money… more than I ever thought I would make in my lifetime and my kid's lifetime combined….” is a long ideological journey indeed.This is not the best of the times to be writing about Vikram Akula’s book. He is still hanging on a roller coaster that he got on to in 1998 and has seen the world turn topsy-turvy around him. For somebody who has been living life of a celebrity for the past few years, the party was planned well: There was a blockbuster IPO, the quiet period had ended and with business processes well in place, he would have moved on a book promotional tour before differences arose with his CEO Suresh Gurumani [whom he acknowledges rather warmly in the book] leading to Gurumani’s sacking and the regulatory cyclone hit the state of Andhra Pradesh, where his operations were concentrated.

But the book is an incredible story of Vikram Akula’s journey from a comfortable New York to rustic Narayanakhed. For somebody who has had a rather comfortable life in New York to come back and re-discover his roots and to work in trying circumstances, fighting a difficult terrain, hostile bureaucracy, insurgency of the Maoists, and local politics certainly has not been easy. For those who believe that Vikram was an overnight success, this story is indeed an eye opener that it took almost a decade and a half of uncertainty and hardship to and even a brush with personal bankruptcy to achieve what he has. To pick up an idea from Muhammad Yunus from the not-for-profit arena, to struggle around the implementation aspects and suddenly to be recognized as the face of Indian microfinance, [while people like Ela Bhatt and Vijay Mahajan remained in the background] – much before SKS achieved scale is no mean achievement. Vikram has worked hard, very hard to be where he is.

Vikram uses his internship with Deccan Development Society [DDS] to lay the foundations for his argument of a scalable commercial model of microfinance. The argument is that the poor have no time for lectures on empowerment, and while they care about education and health initiatives, they also want to get on with life here-and-now [p.43]. This argument is similar to the one that has been extended by Shafique Chowdhary of the extremely successful microfinance initiative ASA of Bangladesh. The evolution from an inefficient all round developmental intervention of DDS to a focused efficient single point intervention carried out by SKS is understandable. Given that the arguments of providing access to financial services to the poor is a laudable business; that this business is less exploitative and provides access with dignity, and is completely voluntary in nature, why is a person like Vikram amidst many controversies?

The answer for this also lies in how the book is constructed, and also on how Vikram’s other writings are constructed. Vikram uses Foucaultian discursive approach to discuss the dominant discourse in microfinance and dismisses the existing models in his thesis submitted to University of Chicago. Using that approach, we could try to understand the text and subtext of Vikram’s book. While the book starts with a woman in a purple saree asking a life changing question as to why she is not getting microcredit while being poor, it ends with a woman showing off her colour television, thanks to SKS not only giving her successive loans, but also inadvertently creating a job for her son.

With her water buffalos, and a home front kirana store her poverty is eradicated and mission accomplished. Or is it?

For instance let us take this excerpt from the book: “Often, when we started …. people decided to test us by willfully not paying. But we instructed our loan officers not to leave the meeting until the repayment came in…. This had a powerful social effect. The entire village would realize there was some issue…..And that person would lose izzath – lose face. Losing face is a fairly devastating thing in a village context, and people will do anything to avoid it.” [p.76] something that ensures repayment and discipline could also be termed coercive if one crosses the line. Clearly there could be a whole debate on where the elusive line is. Vikram does offer a solution for borrowers who faced hardship, but the solution lay not in a pro-active action on the side of SKS but an action that gave the community a lesson on co-operation on how they should bail each other out in case of difficulty, while there is no mention of what SKS would do pro-actively in case of a default.

We could also look at another instance where the loan taken ostensibly for purchase of a goat was kept to buy food. His lieutenant tells the customer “Buying food doesn’t generate income, so you’ll be no closer to getting out of poverty that way. Either buy a new goat, or give us back the loan money” [p.82]. How does his organization expect people out of poverty when they cannot even buy food, but are expected to run an enterprise? The contradiction that we see in this instance has been the pattern of contradictions that Vikram has had to live with. This is where the dots in his discourse lose the connections.

The third interesting discourse in the book is about interest rates where Vikram says “… we actually could have charged much higher interest rates than we did, while still significantly undercutting the moneylenders. But our goal was not to be extractive; it was to make enough profit to cover our costs and fund further growth..” The numbers of SKS as of 2009 and 2010 does not seem to reflect the benevolence in pricing. Of course, if the market can bear it, there is no need to show benevolence in pricing, but to constantly reaffirm the aspect that efficiency gains were passed on to the customers certainly need closer scrutiny. The hard fact that comes out is that the proportionality of transfer of reduced costs to borrowers is not in sync with the gains accruing out of increased efficiency.

So, are we quibbling about the claims made in the book without having an appreciation of what the SKS model is delivering? To be fair to both the promoter and the organization, SKS has indeed shown how a cookie cutter model of microfinance, inspired by Starbucks, McDonalds and Coke could scale and work. It has reached more clients than many of its competitors, scaled fast and shown the potential to hold out. It certainly is not the most profitable [Spandana and Share turn out better numbers] and its yield ratios are also lesser that the two [indicating that it is somewhere in the middle of the exploitative scale, with organisations like BASIX being even less exploitative!].

But we have to realize that this model is hardly justified by the discourse that we get in the first half of the book. The first half of the book tries to look at the clients in their eyes, peep into their hearts and tries to live the life of a client, by using participatory research methods to find out when agricultural would pick up, the wage payment pattern and employment days [p.72]. Having started with methods that were client centric, what made SKS shift to the model where he is obsessed with the idea of cutting meeting times using stop watches, village routes being scheduled on a single road [p.103]? Great management idea, great gains in efficiency, better bang for the buck.. but does not answer the question that the woman in purple saree asks in the beginning of the book.. What happens to the poor families who do not fall on the SKS highway? This is a contradiction that seems to haunt SKS throughout the book.

The move of SKS from client-poverty focused model to an investor-prosperity focused model is rapid. It is so rapid that the stories of several clients committing suicides because of coercion, is brushed aside as clients who had not defaulted to SKS but must have borrowed from rogue MFIs. For a person whose life changed because of a question asked by a woman in a purple sari, seventeen client suicides should have led to a deep introspection and review of business practices. But the SKS response is like the style of the book: more assertive and less reflective.

The contradiction in the life of Vikram Akula will appear even more stark when we do a reading of his PhD dissertation “Assessing Microfinance: An Investigation of Whether Microfinance Reaches the Very Poor” where he almost slams the for-profit models, while maintaining that the double bottom line is important for this activity.

Let us look at this quote from the thesis:

“As for the reasons why microfinance does not reach the very poor, there are three factors. The first is emphasis on financial self-sufficiency which leads MFIs away from the very poor. The second is group liability, which leads the moderate poor to exclude the very poor, who have a high risk of default. The third is the strict repayment schedule and tough penalties for default, which lead the very poor to exclude themselves.

“The first of these three features – the goal of financial self-sufficiency – is the biggest barrier. The problem arises because for an MFI to be financially self-sufficient, it must increase its total loans outstanding…. One easy way to achieve a higher loan outstanding is by increasing the size of the loans…

“So the desire to achieve financial self-sufficiency is a slippery slope to a movement away from the very poor. This is done in two ways. MFIs end up working in less poor regions or working among less poor in a poor region.[p.24]

The dissertation continues to examine the declaration of the Microcredit summit of 1997, which wants to target 100 million of the world’s very poor families with microfinance for self employment, which Vikram finds “incorrect and outlandish” [p.36]

Vikram in his thesis offers a solution to the problem of not being able to reach the very poor by offering the SKS model as a counterexample of microfinance, an experiment that reaches the very poor while having achieved operational self-sufficiency [profits are not mentioned here]. In offering SKS as a successful example, he does caution that with scale the organization might lose focus from the very poor including a candid admission that some of the later branches the ratio of the very poor has indeed reduced [p.116]. However he elaborates as to how a drift could be avoided and the commitment – espoused by the founder/leader has permeated through the incentive structures where the staff lose their entire incentive bonus for the month if they fail to achieve the target of getting all the 90% of the incremental clients from the category of very poor [p.117] and how this applies not only to the field officers, but up the hierarchy.

The thesis itself raises a larger moral question of a conflict of interest. How could a person study a problem and then turn around and offer a solution in an organization that he has promoted and has been heading? To attribute the success to his own leadership skills is at best preposterous. How can a person be his own evaluator and use that to gain a doctorate? Somewhere down the line we find that the University might have erred in permitting this methodology from a pure point of a conflict of interest [notwithstanding the issue that the methodology could be rigorous]. When Vikram uses the word ethical position vis-à-vis the allotment of the second round of capital, it does not come out with a sense of conviction to these values. Or possibly we do not understand the concept of conflict of interest at all. Everytime an issue is thrown at him, the response ranges between his ethical or moral stand to a legal stand. I suppose, SKS and Vikram are legally correct in what they are doing. Let us grant that and then look at the larger debate on the moral fabric of the person and the organization the person heads.

Unfortunately by the time we come to his book of his “unexpected” quest this entire discourse is lost as he moves into the Google territory where he talks about providing access of his client database to players like Metro cash and carry, Airtel, Nokia, Bajaj Allianz, Cavincare and Wipro…[p.165 of the book] to sell their wares on a win-win-win model – where the client, SKS and the commercial establishment all win.

This is not only a huge and unexpected transformation from a young professional who came in the quest of working for the poor, a young professional who questioned the traditional microfinance models and their lack of focus on the very poor, a young professional about whom Vijay Mahajan says “we [Mahajan and Vikram] have differed over several things over the years but we still share a warm relationship. Earlier he thought I was too commercial and now I think he is too commercial.” [Interview with Forbes India, August 10, 2010].

There is a very honest attempt by Vikram to justify his model of work as an end in itself of portraying a successful business. In this the book does a great job. Vikram has a flamboyant style of writing that is convincing. However, there is a huge connect that is missing between the dots… What happened between December 2004 when Vikram submitted the thesis which in its tone and tenor would have ripped the current day SKS to shreds and 2006 when he returned and changed the face of SKS remains a black box. That is the unexpected turn in his life and it would have been great to know why Vikram moved to this extreme commercial model. There must have been some pressing reasons for the transformation of Vikram Akula and I suppose the microfinance community and the world at large would have greatly benefitted it Vikram had been candid and reflective on this, rather than be assertive.

I end this review by looking at the cover of his book. It is titled “A Fistful of Rice”, the picture shows two palms full of rice, a classic mismatch that is endemic to Vikram and SKS. Is it delivering more than what he is promising or promising more than what he can deliver? The choice is for the reader, or should be left for history to decide.

Tata Group: My Essay

I just finished reading a rather ordinary book “Tata: The Evolution of a Corporate Brand”. Ordinary because the book looks very promising with a foreword by Ram Charan and appears to provide insights into what makes Tata the business house what it is. It is neither fully academic in its approach nor adopts a popular model. The central approach of the book has been to work with a series of anecdotes to broadly argue whether this reinforced the brand Tata or not. However what is important in the book is that it does evoke some emotions and as one is reading the book one is able to largely relate to the brand TATA in more ways than one.

Like the author of the book who confesses that he is positively biased towards the brand, it would be appropriate to state upfront that I myself have been a Tata beneficiary and have a great deal of admiration for the group. Witzel almost indicates that Tata is almost the most ethical business house in the country, by showing evidence as to how a junior officer put some customs officials in the anti-corruption net and an instance of Tatas continuing to offer funding to Trinamool Congress as a part of their “apolitical funding” to all parties inspite of the problems at Singur. Instances of allegations that Tatas paid off ULFA in Assam is brushed aside in a paragraph without much discussion, the bias clearly showing in favour. So, the downside of Tatas that is discussed is the scandal that happened in Tata Finance and how they came out of it, including at some stage not opposing the bail for Dilip Pendse the then chief of Tata Finance because they thought that 15 months in prison during trial was enough and the rest of the legal battle could be fought without opposing the bail. In a way he is projecting the Tatas as somewhat sophisticated robinhoods. While there is a great deal of admiration for the group and what they generally represent and the principled stand that they usually take, it may be difficult to accept that sort of a clean sweep generalization. To the author’s credit he does indicate that they as a group are not infalliable, but the view, as he himself confesses does not even try to be balanced.

There are two aspects to the TATA business that is important to be distinguished and discussed separately. The first aspect is something that is very unique to the TATAs on how their ownership is structured and the activities that the group is able to carry out as a result of this structuring. The second aspect is about how the individual commercial companies themselves behave and how the group dictates and shapes their behavior. The author does not very clearly distinguish between these two activities. Yes, it is true that both add to the brand value of the TATAs but it would have been interesting to see what rubs on what.

The first aspect is indeed important. TATA Sons, that has significant stakes in most of the TATA companies is significantly owned by the TATA Trusts followed by Shapoorji Pallonji Mistry and the individual holding of the members of the TATA family is somewhat small compared to the two big blocks of shareholders. That is the reason why it is said that JRD Tata, apparently would say that he is personally not rich in spite of leading one of the leading business houses. Naturally we do not see the Tatas individually featuring the millionaires/billionaires list that is brought out be inquisitive business magazines. The way the TATA group ownership is structured particularly at the holding company level is something of a legacy that they have inherited and future generations would find it hard to reverse what was done by the first two generations of the family. In a way the senior Tatas bound the coming generations to a certain type of behavior – without giving them much of a choice. That the following generations have maintained what was left as a structure was without much of a choice. However the fact that they in their own way positively contributed to the legacy is something that comes out as commendable. In a way, it is indeed important to lay down the DNA of an initiative in a fairly irreversible manner so that it is difficult for the newer generations to screw up the basic fabric of what was intended.

Weitzel does talk about the last decade of JRD and the initial days under the Chairmanship of Ratan Tata where it appears that the group was losing direction, was seen as a company living in the glory of the goodness of the past and was not seen really as a contemporary group keeping in touch with the times. When the holding is owned largely by a set of charitable institutions, the dynamism to keep the glue of the organization in tact therefore comes from the drive and zeal of the person at the helm. The market forces cannot help the unlisted holding if it decides to relax and is not necessarily seen as agile. Therefore as rightly pointed out in the book, we have a situation where the individual entities of the group could have been doing well [as they were listed and answerable to the market forces in general] but the group itself – represented by the holding company not seen as agile and active. This possibly explains why each of the Tata companies was seen as the fiefdom of the star chiefs – be it Darbari Seth, Russy Mody, Moolgankar and the others.

The challenge therefore for the group was and will remain in how the holding company is structured. Before Ratan Tata stepped in and started the consolidation of the Tata brand and cajoled the individual firms using the Tata names to sign up an agreement for payment of royalty to Tata Sons and also come to a common understanding of what a Tata identity means, each one of them were run as outfits that almost did not belong to a group. Even the holding of Tatas in each of these firms was low and the ownership had got very diversified. It was only in the first phase of Ratan Tata’s tenure that through a series of decisions on retirement age, rejigging of boards and consolidation of holdings [and even renaming companies] that the Tata imprint started getting planted on individual units. This phase also represented the sale of some of the Tata businesses and taking stock of the business they wanted to be in, in the longer run. During the second phase of Tata was the phase of high profile acquisitions, launching of a car, planning for the people’s car Nano, and consolidating on the Tata brand name as an aggressive brand that means business.

So when we deconstruct the Tatas in India, the bottomline comes to the businesses and the Trusts. I am not sure that the Tata businesses stand out as extraordinary businesses with a unique Tata imprint. Except for the Nano innovation, most of the businesses run the way any business would. Indica was a disaster when it was launched, and they improved it over a period of time. The service levels at any Tata outlets does not outshine any other competing brands. Yes there is an aura that they are largely ethical businesses, and took a principled stand in Singur [inspite of burning cash] – but I guess it was more a hard nosed business decision than a principled one. Imagine the trouble they would have had on an ongoing basis if they had actually set up a plant in Singur. The fact that they opened shop in Gujarat [in spite of Ratan Tata himself having made some comments about Chief Minister Modi in the wake of the post Godhra riots] shows that when it comes to business, it is not necessarily a moral high ground that dictates the behavior, instead the best interests of the business itself. Therefore there is nothing that stands out as a Tata way of doing business at the consumer end. Your walk in experience at Croma is no better or different from EZone, the landmark store looks huge and disorganized when compared to crossword, and there is nothing that Tata Sky provides as a tata experience [other than Aamir Khan encouraging you to drop out of school!] on the Tata Sky dish business. I own an Indica and have had nightmares everytime that I have got the car serviced. Hardly different of distinct from a typical Indian consumer experience.

However, what does rub off positively on the brand is the work [particularly in me sector] that the Trusts do. They have been involved in some of the most constructive activities across the country, the activities spanning across hospitals, educational institutions, funding voluntary agencies and working in the areas of art and culture in the most constructive way. The trusts are very careful in the way they use their money and do not splurge. I personally have benefitted from a liberal and ongoing grant to study the microfinance sector when I was at IIMA. I have done work for the Trusts and the amount of attention they pay [including the top management of TATAs] to the work of the trusts is noteworthy. Given that many corporate houses do not do organized philanthropy [and possibly splurge on building fancy temples], the way they have put what could have been the personal wealth of the family to public service is something that we need to commend. Somehow the book does not seem to make this distinction between being an ordinary business with flashes of brilliance and an extraordinary group structuring that makes them a very social organization.

The Tata brand therefore is a brand that represents a whole lot of goodness, and not all of that goodness actually comes from their businesses. One thing is certain: They are certainly a mature business group. Apparently people who were in the forefront of protests in Singur were directly or indirectly all beneficiaries of Tata – some were direct donees from the trusts, some [including Medha Patkar] were graduates of TISS – TATA Institute of Social Sciences and as per Wietzel, even Trinamool congress was a Tata donee, and it continued to be one, till suddenly the party realized that it had a conflict of interest and returned the money. That incident is a good enough illustration as to how divorced the commercial and philanthropic interests of Tatas. Unfortunately Witzel tries to attribute the goodness of the structure and individuals on to the group and disappoints on this count.