management by matrices

a fresh perspective on management.

The Free sourcing ecosystem

My latest column for The Hindu Business Line appears today - The Free sourcing ecosystem
Full text follows:
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The first wave of outsourcing was enabled by major trends such as the rapid advances in information technology and communication, opening up of national economies and availability of skilled labour markets in these countries. Initially, outsourcing was viewed as a way to ship ‘non core’ activities out of the parent organisation to specialists offering the same service at a low cost. However, a study of the competitive advantages possessed by players in any indu stry would reveal that the notion of ‘core’ and ‘non core’ is gradually blurring.

While some players possess advantages in product design, others do so in distribution and some others in customer service. It is not difficult to imagine a future in which enterprises focus only on one kind of specialised activity in which they possess competitive advantages over other players and do not participate in other activities. Such an ecosystem would consist of highly specialised firms that come together in various configurations to innovate, produce and distribute goods and services to customers. What kinds of players would such an ecosystem of enterprises consist of?

Artists — Product and Design organisations: These would be knowledge-oriented enterprises that thrive on the study and creation of knowledge. Their primary function would be in the arena of product design and research and development. The revenue source for these companies would be the creation of intellectual property which would in turn lead to licensing opportunities. This model is not unlike that of an artist who creates an original body of work for which he can earn royalties over an extended period of time.

Craftsmen — Production companies: These are companies and individuals that are engaged in the act of actually producing goods and services. In other words, the role they perform is that of a craftsman or artisan who mass produces objects of a given design. The specialised skill they bring to the table is the ability to efficiently mass-produce products through appropriate use of resources and technologies. Additionally, these entities may also add value through product customisations and tweaks that build on existing intellectual property. The end product would either carry the brand of the production company or that of the product and design company.

Socialisers — Distribution companies: The role of socialisers is primarily to ensure that the output of the craftsmen reaches society through marketplaces. These are companies with distribution infrastructure that may support multiple products of the same industry or different industries. The underlying assumption is that in the end, the customer has the final word on product choice. The role of the socialiser is to ensure availability of all options. The revenue stream for these entities would be in the form of commissions from various production companies they serve.

Fulfillment providers — Service companies: Service companies would engage primarily in the arena of customer fulfilment and after-sales support. Once again, these companies may operate across products and across industries. Outsourced call centres are an example of entities that perform this function today. These entities benefit from economies of scale and are hence able to offer highly competitive prices to the production companies.

End customer (Co-creators and Evangelists): The end-customer is also an important part of the product life cycle. The first role he plays is that of an influencer through evangelism of good products. The second role he plays is that of a co-creator of new products. The views of the end-customer directly affect future design of new products. In this way, the end-customer is closely linked to the design companies and has an active say in the kind of products and services he would want to use.

For each industry, the combination of players that would come into play in this ecosystem would be different. Let’s look at how a model like this fits into an industry like asset management (mutual funds and so on).

In the ‘free sourcing ecosystem’, the ‘artist’ role would be performed by companies that purely specialise in research and creation of portfolios of instruments to invest in. There would be no ‘craftsmen’ because the product in this case is not a tangible, physical one. The ‘socialisers’ would be the various companies — like online trading portals, distribution companies and so on — that distribute these investment products . The ‘fulfilment providers’ would consist of BPOs that handle operations and after-sales support. The ‘end customer’ would be a co-creator whose inputs would influence future product design.

Depending on the industry under consideration, some players in the ecosystem may be absent. However, the broader idea is of a marketplace of specialised enterprises that freely come together in various configurations and freely separate and plug into configurations with other enterprises if things do not work to mutual benefit. It is not difficult to see that an ecosystem like this will ensure that there are minimal inefficiencies in the entire value chain from product innovation to product consumption.

Older columns are as follows:

Fixing the subprime mess

Firstly, I'm no expert on this subject, but here's something I've been thinking of as a possible solution to the crisis.

Make all mortgage payments of existing homeowners in the US to be 100% tax free for a period of say 5 years. This would make the net cost of payments lower for the end customer and hopefully reduce foreclosure rates. It would also provide an incentive to households to divert as much of their income as possible to mortgage payments (after all they get to own their houses as well as pay less tax to the government). This in turn may help housing prices to stabilize instead of going down, and all those potentially worthless mortgage backed securities may finally have some value.

(PS: This is just an idea that popped into my head - haven't quite done enough research on the financial crisis to verify if this will work)

Update:
Very interesting news item on the CNBC site on the increasing rate of foreclosures in the US.
McCain wants the government to actually buy out mortgages.
"The administration is not doing what I think they should do, and that's go in and buy out these bad mortgages, give people mortgages they can afford, stabilize home values and start them back up again," McCain said in a live interview with his vice presidential running mate, Sarah Palin.


It looks like McCain is approaching this problem from the right direction in so far as recognizing that a possible solution likes in 'bailing' out end customers which sets a virtuous cycle in motion, as opposed to just bailing out financial institutions.

Satirical video on the markets

All about the markets, investment banking and the sub-prime crisis.

Absence of 'Yuppie' centered entertainment

Aadisht has a very good categorization of the rich, and a good follow up post on the fact that there is no Yuppie programming on TV and very little in the movies. In brief, he proposes the existence 3 kinds of rich people:

Yuppies - the educated MBA types with EMIs to pay and a monthly pay check
Lalas - Owners of big family businesses
Hippies - Creative types like actors etc.

Using the categorization above, I developed a hypothesis for the absence of Yuppie content in the entertainment sphere.

Why Hindi movies/ soaps are centered around Lalas and Hippies:

1:

The first reason is that frankly Yuppies don't lend themselves to great stories of romance and adventure. For that you need Hippies or Lalas who don't have to worry about making a living. I mean two characters sending each other mails in Outlook can't quite hold an audience's attention (even if the audience is Yuppie).

2:
The hindi film industry is completely run by Lalas, Hippies, sons of Lalas (Karan Johar) and sons of hippies (Abhishek Bachchan). Now when a lala or a hippie writes a script it will inevitably be about Lalas and Hippies. For them Yuppies are some strange species that they see through the tinted windows of their E-Classes. You know, the strange species that drives red Maruti Swifts and follows traffic rules.

Soaps are also written and produced by rustic hippies and lalas respectively. So no hope there.

The only hope is when Yuppies crossover to become Hippies. Eg. Nagesh Kukunoor, Chetan Bhagat’s movie about the Call center etc.

My prediction is that pretty soon quite a few yuppies will make hippie transitions once they find out that corporate life is meaningless and/or pile up a truck load of cash in their savings accounts. Secondly the corporate film houses will realize that the lala/hippie fare doesn’t work too great with the multiplex crowd and will start funding small budget yuppie movies (Aamir, A Wednesday etc.)

So, there is hope.

Organization Culture as an Emergent Phenomenon

My latest column for The Hindu Business Line is entitled Organization Culture as an Emergent Phenomenon.

The full text follows:

Emergence is a phenomenon that has been studied in many disciplines and it refers to the way complex systems and patterns arise out of a multiplicity of relatively simple interactions with no central coordination. Emergence is seen in systems such as nature, stock markets, traffic patterns and organisations. For instance, an ant hill is an emergent structure created by hundreds of ants, each of which is engaged in a particular kind of activity without being aware of the re sultant structure. Similarly, complex flocking patterns amongst birds actually emerge out of simple behaviours on the part of individual birds (such as trying not to collide with other birds while still being part of the flock). In other words, the emergent structure is more than just the sum of the parts. In this article I propose two ideas — first, that organisational culture is an emergent phenomenon and second, that ‘values’ are the underlying ‘simple rules’ governing culture.

An emergent reality

It is possible to view organisational culture as an emergent outcome of the countless interactions that take place between the various constituents of an organisation. Each participant is not aware of his contribution to the overall emergent culture, and behaves in an independent manner in all situations based on his own personal beliefs.

If this is the case, it would appear that it is very hard to ‘control’ what kind of culture may emerge in a given organisation as the behaviour of individuals is hard to predict. How then does one go about creating a particular kind of culture? The answer may lie in our understanding of emergent systems as being an outcome of individual agents acting on the basis of simple rules. When these rules are executed by a large number of participants, an emergent structure presents itself. Extending this to an organisational scenario, if a few simple rules were to be set that governs all interactions of an organisation’s members, the emergent reality — in this case organisational culture — can be managed to produce favourable end states.

Role of values

Most organisations already have the building blocks for this simple set of interaction rules in the form of ‘company values’. The only problem though is that company values are not designed keeping in mind their potential to influence culture. Some values tend to be based on universal morals such as ‘integrity’, while others, like ‘passion’, have no links to day-to-day behaviour.

An organisational value should ideally have two characteristics — specificity or uniqueness and linkage to behaviour. Specificity means that a value should be unique and based on the specific organisation under consideration. Secondly, values must be behaviour linked; they must clearly imply what kind of actions someone would need to perform to adhere to them. Of course, all universal values continue to operate regardless of whether or not they are an ‘official’ value. MindTree is a good example of a company with both unique as well as behaviour-linked values. Caring, learning, achieving, sharing and social responsibility are the values of this company (many surveys have rated it among the best employers).


Values-Interactions-Culture

The resulting model would be as depicted in the accompanying figure. At the heart of the model are values — these are to be very carefully determined by the leadership of the organisation and periodically reassessed. These values form the basis of countless interactions between members themselves, and between members and other stakeholders such as customers.

The resultant emergent phenomenon would be the organisational culture. In order to foster a strong link between values and actual behaviour, reward systems must be aligned to incentivise demonstration of values.

Finally, it must be recognised that well ‘designed’ values help to actualise the ‘unique goodness’ of an organisation through the creation of an enabling culture, which in turn ensures that people who intend to contribute meaningfully are not hindered in any way from doing so.

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Older columns are as follows:

The new Microsoft campaign

I love the new Microsoft campaign ("I'm a PC"). It hits out beautifully at Apple's slightly elitist positioning of its products that sometimes suggests that if you are not an Apple user you aren't hip.

Changing Time

My latest column for The Hindu Business Line is as follows:

Changing Time

As the Indian economy grows over the next decade or so and a predominantly young population enters the workforce, a big problem that is likely to emerge is a certain loss of meaning. The early symptoms are already visible in the form of high attrition and low employee morale and loyalty across all levels in most industries. It appears that human fulfilment would ironically face its biggest challenge from rapid economic growth and its numerous harmful side-effects. One such side-effect is the commoditisation of time.

Unsustainable bubbles

In a recent article, MIT professor Peter Senge proposes that the very notion of the Industrial Revolution is a bubble much like the dotcom bubble of a few years ago. The current climate change crisis we are facing is a fall out of this bubble, which is now in its last stages. Over a long period of time, rapid industrialisation has occurred in a manner that has been completely out of sync with nature and the costs of those actions are beginning to be borne now.

In much the same way, rapid economic growth leads to another bubble — an unhealthy relationship between people and the time they have on their hands. The people inside the bubble are led to believe that time can be spent on only two kinds of activities — either in the production of goods and services as part of the workforce or in the consumption of the very same goods and services. Needless to say, this view is completely out of sync with the way human beings are designed, as creative agents who seek fulfilment through multiple dimensions (depending on their orientation) including economic activities, community, family, art, service to society, spirituality and so on.

The leisure economy

The Leisure Economy is a book by Linda Nazareth that explores how “changing demographics, economics and generational attitudes will reshape our lives and our industries,” and how the ‘time bubble’ discussed in the previous section is headed towards its end. In the book, she proposes that as Gen X and Gen Y individuals dominate the workforce over the next few years, they will discard many old notions about work and leisure time. It is not hard to see that the cultures of companies founded by Gen X/Y entrepreneurs (like Google) is radically different from the cultures of older organisations with regard to how the workforce spends its time, as well as the manner in which a closer integration between work and other aspects of life is encouraged.

Timothy Ferriss, author of the best selling The Four Hour Work Week also makes a strong case for looking at work and leisure in a new way. Amongst other things, he advocates the idea of taking a number of ‘mini-retirements’ over the course of one’s working life as opposed to the traditional notion of retirement as one long stretch of time (of delayed gratification as it were).

Towards a more balanced world

While the leisure economy may be an emerging reality in highly developed economies of the West, it may well be some time before it comes true in developing nations. However, considering the globalised world we live in today, one could guess that the learning curve would be far more compressed. Either way, the trend clearly points to a future where people will look for fulfilment through multiple dimensions with the underlying currency being time and its balanced allocation across dimensions. Secondly, there would be a growing realisation that human fulfilment is an ongoing parallel activity across all these dimensions and suppressing one in the interest of the other will inevitably fail in the long run. Finally, the notion of time as a commodity would be replaced by the notion of time as a currency, as a form of income that is as important as financial income.

Previously published columns:

Health care entrepreneurship

The invisible hand of the economy is beginning to touch health care in India:
Dr Shetty is turning serial entrepreneur. The grand plan is to set up health cities in several state capitals with training institutes for medical manpower. Health cities are large complexes that will house different specialties for treating major diseases, and both state governments and private equity have bought into Dr Shetty's vision for transforming the health landscape of the country.

While AIG and JP Morgan have pumped in Rs 200 crore each for a combined 25 per cent stake in the holding company Narayana Hrudyalalya Private Limited, state governments have offered large tracts of prime property in Ahmedababd, Jaipur, Bangalore, Bhubaneswar and Dehra Dun.

This is by far the most ambitious expansion drive among private players in the country with Dr Shetty expecting to add 20,000 beds in the next five years.

More here in a feature story on Dr. Devi Prasad Shetty

Wealth in Ideas and Relationships

My latest column for The Hindu Business Line appears today. Providing both the link and the full text below.

Wealth lies in Ideas, Relationships

Mohit Kishore

“If you have an apple and I have an apple and we exchange these apples then you and I will still each have one apple. But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.” - George Bernard Shaw

In its own way, this quote seems to suggest, and quite rightly, that wealth lies not in physical objects but in ideas.

It seems that the biggest mistake businesses make is in their search for wealth in the marketplace.

There seems to be a notion that the purpose of business is to map the wealth in the marketplace, in the pockets of ‘target groups’ and ‘customer segments’, and somehow transfer that wealth into the books of the business by providing goods and services.

To me this seems a transactional, non-sustainable approach. In my view, real wealth lies in two things: Ideas, and relationships.

Ideas

No business can be sustainable over a prolonged period of time by merely doing the same thing over and over. The outsourcing industry works on the idea that technology can be used to do non-core activities for companies in remote parts of the world, where labour costs are lower.

However, it is evident that this idea alone is not enough to sustain the outsourcing industry for ever.

In India for instance, the fast growth in the economy, high attrition and rising wages means that the cost of operations for the outsourcing industry is going to rise, and the idea of labour arbitrage may soon lose relevance.

This means that for this industry to be successful, newer and newer ideas are required that ensure that competitive advantage is maintained.

The same is true for any organisation. Not many ideas are of eternal value, and hence there is a constant need to evolve newer and newer ways of doing things.

Mature economies realise the value of ideas, and this explains why one finds a strong culture of venture capital investors investing in small, innovative, early-stage companies working on new ideas.

They realise that the risks in such investments are high, but the rewards can be substantial.

Relationships

The second source of wealth lies in relationships, particularly with customers, and on a larger scale with other stakeholders — society, nation and the environment. Iconic companies tend to focus on one or more dimensions of these really well.

For instance, businesses of the Tata group in India have always had a strong sense of nation-building and social responsibility associated with them. The wealth that lies in strong relationships manifests itself in the form of brand equity, which is, in itself, a source of material wealth (through increased sales, customer loyalty, etc.)

Apple is another company that values its relationships with its customers to such an extent that there is a reciprocal relationship from its customers that borders on devotion – something that causes them to buy high-priced initial releases of Apple products despite knowing that the prices will come down drastically in a few months.

Transactions not equal to wealth

It appears today that a lot of organisations value transactions over ideas and relationships.

An undue focus on transactions as a source of wealth means that market share and sales assume a central role in business.

When this happens, there is a large amount of ‘mis-selling’, poor customer loyalty, a lack of focus on customer service, low value on ethical behaviour and an overall deterioration of enterprise value. Some pockets of the financial services industry (like credit cards) are already demonstrating the effects of such a deleterious strategy.

Wealth = Ideas + Relationships

This is not to suggest that wealth in material terms is bad. It is only bad when this wealth becomes the central driver of strategy.

In fact, a study of successful organisations clearly shows us that wealth in material terms (revenue, market share, and so on) is an automatic by-product of the wealth contained in ideas and relationships, and a strong focus on these two dimensions is not just a one-time affair (at the time of the founding of a business) but a long-term, on-going process of adaptation and evolution.

Business Today b-school rankings

Business Today has once again come out with it's illogical survey of b-schools. I have already criticized it here last year. Wont add anything more!

Interview of UTV's Ronnie Screwvala

UTV's Ronnie Screwvala makes some interesting observations about "Scale versus control" in this Knowledge@Wharton interview.
That was a crossroads that we had already crossed -- UTV as a company and myself personally. For me, scale is more important than control. Once you start thinking about scale, performance is going to count in any case because we are a public limited company. Whether Disney thinks I am a good CEO or the rest of the shareholders think I am a good CEO is equally bad or good -- because I have to be accountable for my performance. The other thing that comes about when you cross the 51% threshold in shareholding is that of overall accountability in that context -- and therefore management versus shareholding. If I think I am not the right person to lead the company at the next level of its growth, I could just continue to be a shareholder.
More here

Unlocking Potential

My latest column in The Hindu Business Line: Unlocking Potential

Full text follows:

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Self-actualisation is a term that was first introduced by Kurt Goldstein and later popularised through Abraham Maslow’s theory on hierarchy of needs. It is the final stage of human psychological development, when all lower needs (physiological, safety, love/belonging and esteem needs) have been satisfied. Through self-actualisation, the individual attempts to make the most of his true self and potential.

Can this notion be extended to organisations and institutions? After all, in the same way that individuals strive towards self-actualisation, organisations too try to realise their true potential through the strategic choices they make. Of course, in a human context, self-actualisation leads to fulfilment, happiness and so on while in an organisational context, the equivalent end state could be financial success, sustainability, employee satisfaction and customer loyalty.

Relationship to corporate strategy

Organisational strategy creation can thus be viewed as the attempts by an organisation to manifest its inner good. This ‘inner good’ in my view is not a ‘general’ good. It is a particular inner good, specific to the organisation under consideration. Formulation of strategy then must take into account the fact that it is best to actualise this particular inner good, rather than try to simply replicate the models of other firms in the marketplace.

For one organisation, the ability to scale may represent its highest potential. In that case, a market share-based strategy would work well. For another organisation, the highest potential may lie in its ability to serve customers well. In such a scenario, adopting a quality-oriented strategy may work better where the focus is not on the number of customers but on customer satisfaction.

In other words, the human notion of ‘being yourself’ holds true for organisations as well. Indian public sector enterprises have faced this dilemma in the face of aggressive private sector players. Some public sector enterprises and nationalised banks, for instance, have made attempts at re-branding themselves along the lines of their private sector competitors by attempting more youthful and contemporary brand positioning strategies. It is debatable whether this will indeed be effective in winning more customers. Instead, a better strategy may have been to play on their true strengths such as ‘trust’, ‘stability’, ‘relationship orientation’ and so on.

Determination of potential

The question then is how does one determine what the highest potential of an organisation is? One way could be to look to the founding leadership and their values. A disadvantage of this method could be that as organisations begin to outlive their founders, founding values tend to get eroded and in some cases lose relevance.

The other way to determine potential is to look at the organisation as it is today and determine what it could be good at. This method has its own disadvantages because the situation an organisation is in at present may well be the sum total of bad choices made in the past.

One other way could be to start with customers. Finding out how customers relate to the organisation and ‘what works’ for them may be a useful starting point to determine the highest good.

When The Coca-Cola Company launched a new formulation of its drink called ‘New Coke’ in the 1980s it was met with serious protests from loyal customers, leading to the withdrawal of the product. To these customers, Coke was the quintessential American drink that represented American values, and hence any change to the brand was seen as almost blasphemous. It could be argued that loyal customers of the brand had a clear notion of the ‘inner good’ of The Coca-Cola Company much more than the executives working there. Thus, determination of potential may involve a holistic study of three axes — founding values of the organisation, existing values of the organisation and customer-defined values.

The end goal – purpose

Finally, self-actualisation (either for an individual or an organisation) is not necessarily an end result. It is also a process of making choices along the journey. The choice could either be what Maslow calls a “growth choice” or a “regression choice”, and the idea is to repeatedly make a growth choice when faced with a decision point. The act of making a growth choice is an act of evolution and evolution leads to greater fulfilment.

Put in the context of organisations, the very process of self-actualisation is likely to create a strong sense of purpose and direction in the minds of all stakeholders, and that alone is worth the effort.

(The writer is an alumnus of XLRI, Jamshedpur.)

Previously published columns:


Amitabh Bachchan's Blog

With the attention that the Big B's blog is getting on Big Adda, it may not be a bad idea to convert Big Adda into a pure blogging platform and get rid of all the social networking stuff. Blogging is a standalone feature, which can succeed by itself, whereas a social network can succeed only if it has a critical mass of linked up users, and I don't see Big Adda achieving that in the face of Orkut and Facebook.

Secondly, with so many "stars" embracing blogging, it looks like blogs have completed the long journey from being a geek's tool to a mainstream medium.

XLRI Placements

XLRI Placements

The lives of others | The conversation

The lives of others” – this year’s Academy award winner for the best foreign language film stands at the curious intersection between art, love, literature, politics, bureaucracy, and history.

The film is set in the erstwhile East Germany at the time when the Stasi (the secret police) placed pretty much every other citizen under surveillance. One such member of the Stasi (Weisler) is asked to monitor the renowned playwright Georg Dreyman who is suspected of having leanings towards the west. Weisler wires Georg’s apartment and then spends his days listening in and preparing daily reports of his suspect’s activities.

The real reason why Weisler is put on this assignment is so that Georg’s western leanings can be proved as basis for his arrest, which would then allow minister Hempf free access to Georg’s lover, the actress Christa-Maria. Once Weisler discovers this, his sympathies gradually shift towards Georg. Weisler finds himself immersing into Georg’s rich literary world of idealism and hope for a better future. Pretty soon Weisler begins to fudge his daily reports to divert suspicion from Georg on a controversial article that he publishes in the West after the death of his theatrical mentor. A man who was once an impassive arm of the state’s machinery now finds himself moved by Georg’s heady world of Brecht, Beethoven, passion, love and intrigue. From here on, the film takes interesting plot turns as Weisler, the neutral observer turns into an eager, yet invisible supporter of Georg’s actions.


It is here that “The lives of others” reminded me of an older Francis Ford Coppola film called ‘The Conversation’ in which Gene Hackman is a surveillance expert who is tapping into conversations between a couple. What begins as an unemotional impassive project turns similarly into one where Gene finds himself getting actively involved in the lives of his ‘targets’. It reaches a point where Gene steps in to avert a potential tragedy that would have occurred as a result of the information he has recorded (though at this point the film takes a completely ironic twist which I wont give away.)

It’s interesting to note that in both films, the surveillance expert begins as an unemotional witness to events but eventually turns into a sympathizer of his targets. Both films explore numerous other issues too, but central to each film is the idea that it is impossible for any human being to be a mere neutral observer of events around him. At some point the desire to influence events, to correct wrongs overcomes even the most stoic, duty-bound automaton type character like Weisler or Gene. Also, both films expose how ideology (political, professional…) need not always assume precedence in our dealings with the world, particularly in the face of raw human emotions that bind people even on opposite sides of the same issue.

Wikipedia articles on both films:
The lives of others
The conversation

How to make wealth.

How to make wealth.

An evolutionary view of leadership

Yesterday, The Hindu Business Line carried my latest column in which I explore the relationship of leadership to various kinds of wages. Link: An evolutionary view of leadership

Full text follows:
A casual perusal of the management section of any bookstore would suggest that ‘leadership’ is the most desirable goal that people have for their lives. This may indeed be true, but evidence in the real world suggests that there is more to leadership than meets the eye.

In the real world, leadership is often bestowed upon an individual who is most likely to work in the interest of the group he leads, even if it means sacrificing his own well-being. While, the first-half of that statement is rather clich├ęd, the second part is the one that is more interesting. It is our tendency to choose leaders who will not work for their own self-interest that leads most people to actually not want to be leaders themselves. They will gladly be followers and reap the benefits of having a leader who will work to maximise the wellbeing of his constituency, rather than step on the pedestal themselves. This argument is also found in Plato’s Republic.

Plato’s Republic presents this idea through an argument between Socrates and Thrasymachus in the course of which Socrates says: “No one willingly chooses to rule and to take other people’s troubles in their hand and straighten them out, but does ask for wages… In a city of good men, if it came into being, the citizens would fight not to rule. There it would be clear that anyone who is a true leader doesn’t by nature seek his own advantage but that of his subjects. What kind of wages is Socrates referring to? The answer is — money, honour or a penalty if the individual refuses to lead.” (Source: Justice and the Leader, by Plato from Republic Book I – Hackett Publishing, 1992)

Leaders and wages

Now, this seems to suggest that people only become leaders in order to get the above kinds of ‘wages’ and for no other reason. In other words, if there were no ‘wages’, no one would ever want to be a leader. This may be a bit far-fetched. Surely, history has shown us enough examples of ‘wage-less’ leaders such as Gandhi and Mother Teresa. The idea of ‘servant leadership’ developed by Robert Greenleaf suggests that a leader’s role is purely to serve the needs of his constituency and not to increase his personal power or glory. In other words, for such leaders the wages, if any, are purely incidental.

Is there any way to reconcile these two schools of thought — one which suggests that all leaders work for tangible or intangible ‘wages’ and the other that suggests that leaders should only serve their followers and have no other goals? It may be instructive to view the concept of leadership as an evolutionary hierarchy. At the lower end of the hierarchy are leaders who are in it for the wages. Needless to say, they too serve their followers, but do so with personal goals in mind. As the leader evolves over time, the marginal utility of wages would decrease and finally reach a point where he demonstrates the qualities of a classic servant leader who is focused on the needs of others.

Servant leaders

Examples of such evolution are easy to find, particularly among business leaders who after many years of building great companies move on to set up charitable foundations that are not profit oriented (the Bill Gates Foundation for instance). In between these two extremes, there could be many other variants with differing ratios of ‘wage’ to ‘wage-less’ orientations.

Viewing leadership in this manner, as an evolutionary ladder, also helps us resolve Plato’s problem of people not wanting to be leaders in the first place. The initial steps of this evolutionary ladder allow and encourage wages, thereby ensuring that people are motivated to take up responsibilities that they would have otherwise shirked, and the higher levels of the ladder are for people who are not in it for themselves.

The key thing then becomes identifying the right kind of leaders for the right kind of roles in society. An example of how things go wrong when there is a mismatch between the role and the wage orientation of leaders in that role is the political leadership in this country which has long been tarnished by cases of corruption by individuals who seek personal ‘wages’ over the larger good . On the other hand, middle managers in most businesses belong to the ‘wage oriented’ category, and they certainly seem to do justice to their roles by both maximising their personal gains as well as achieving organisational goals.

In conclusion, it makes sense to allow and embrace both wage oriented and non-wage oriented leadership, provided that the extent of wage orientation in the individual matches with the leadership role that is on offer.

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Previously published articles:

Obama

This is an extraordinary piece of oratory: