An All India Management Association Study for BT

"Because it is there."

--Sir Edmund Hillary

Just like the legendary climber who needed no stronger reason to conquer Everest, corporate India can seek no stronger reason to scale the peaks than the fact that they are there. Once, companies seeking to benchmark themselves against world-class standards--by identifying the best performance in every field and then trying to close the gap with it--had to search for global calibrations. No longer. Six years after liberalisation and competition, at least one of your peers and competitors is doing something better than you are. Bet on it. Benchmarking your practices, therefore, must now start at home.

However, just what are the standards that corporate India is setting? For the first time, comprehensive answers to that question are available. In a pathbreaking countrywide survey conducted by the All India Management Association (AIMA), covering 160 companies, the habits of effective corporates stand revealed along seven vital dimensions: Strategy. Marketing. Operations. Value-Chain Management. Infotech. Human Resource Management. And Finance. Want to know how many of your competitors are building their strategy on the bedrock of a mission statement? Or how many are integrating instead of diversifying on suppliers? Or how many have well-defined infotech objectives for the next three years? And where your company stands in comparison to all of them?

Welcome to the BT-AIMA benchmarks of corporate India's management practices. These are the trends that will tell you whether you're among the converts, or the blasphemers, when it comes to the new gospel of management. Sliced according to corporate genres, these findings present the perfection profiles not just of the generalised corporation--but, specifically, of the typical manufacturing company, the typical marketing company, the typical services company, and the typical infrastructure company. Want to benchmark yourself against other companies of your dimensions? Examine the typical megacorp if your company's turnover is more than Rs 1,000 crore. Or the typical midicorp if it is between Rs 250 crore and Rs 1,000 crore; the typical minicorp (between Rs 100 and Rs 500 crore); or the typical microcorp (less than Rs 100 crore). How far, then, has your company progressed towards attaining best-in-class standards?

The Strategy Benchmarks

Begin with the very architecture of strategy. Not associated by corporate India in the past with making critical choices or with taking up a distinctive competitive position vis-à-vis rivals, strategy today is a palpable differentiator between those who are trying to control the future and those who are willing to be swept up by it. How well do you know the strategic framework in which your peers and competitors are operating? You are in a thoroughly uncompetitive minority of 17 per cent if yours is a manufacturing company which either operates without a stated mission statement, or isn't even in the process of drafting one. The bedrock of strategy for more than 7 out of 10 members of corporate India, the mission statement is ubiquitous among the megacorp: all of them have one ready, or in the making.

Need a profile of your perfect competitor on the strategy front? Generically, your competitor is more likely than not to have a published business strategy--a how-to manual, as it were, laying out the roadmap to making the numbers that the mission statement spells out. Over 60 per cent of manufacturing companies have one, as do more than half of services and marketing companies. Warning: as a member of any of these sectors--or if your turnover exceeds Rs 100 crore--working without an articulated business strategy will put you at an obvious disadvantage. A corollary: if your strategy is frozen in time, start again. A majority of corporate India strategises no more than three years ahead.

The crucial question, of course, is: how distinctive is your competitive strategy? The general preference--cutting across sectors and sizes--is for strengthening core activities, and improving information management. Not following suit may mean lost opportunities. At the other end of the scale, M&A is not a preferred strategy, which could also indicate untapped opportunities. But then, that only makes benchmarking against best practices before finalising growth strategies all the more important.

The Marketing Benchmarks

Enveloping every shift in marketing techniques today is the understanding that the balance of power now lies with the customer. That's the common paradigm underlying the death of old markets, the emergence of new ones, the advent of price-led competition, the triumph of Value-For-Money marketing, and the absolute imperative of providing quality and delighting the customer. Against this backdrop, the practices of the most intensive marketers in corporate India must, of necessity, be matched by your company.

If, then, your company belongs to the small pool of 7 per cent that does not have a clearly defined marketing strategy--think of it as a sequence of steps outlining the big ideas behind every brand and the means to convey those ideas to the consumer using existing and new marketing tactics--bridge the gap immediately. To make sense of such a strategy, of course, best marketers also have sharply-defined marketing objectives. An audit of your own goals in this context will reveal whether you're up there with the best: after all, with 97 per cent of marketing companies, 92 per cent of manufacturing companies, and 90 per cent of services companies having such objectives, can you afford to compete with them with inferior weapons?

Nor can CEOs use size as a pretext for not catching up with the best-in-class: while the megacorps are committed to the extent of 94 per cent to specified marketing objectives, even 90 per cent of the microcorps believe in it too. The essential adjunct, of course, is a formal process for marketing planning, which barely 10 per cent of corporate India operates without. Naturally, there's a cost to wielding these weapons: manufacturing and services companies--as well as sub-Rs 100 crore companies--need to allot at least 3 per cent of their turnover to marketing. Double that figure for marketing companies, and for all mid-sized corporations. If they don't, their share of hardsell and softsell will definitely fall below the threshold of consumer perception.

However, just what is the planning and the money being channelled into? How closely do your marketing strategies converge on those of your competitors? The hottest technique for increasing marketshares today is, interestingly enough, neither heavy advertising nor motivising salespeople--but developing the best possible talent-pool for undertaking marketing activities. Your marketing benchmark, if yours is a marketing or a services company: intensive training for key people. Of course, you must be prepared to use the learning initiative in consonance with traditional marketing strategies like product and market development and market penetration if you want to stay up there with the leaders.

The Value-Chain Benchmarks

Examine your new benchmark for upstream and downstream value-chain management: the Pareto Principle. In all sectors in general, and in the manufacturing sector in particular, companies are desperately downsizing their supplier and customer chains. The objective? Forging relationships with preferred partners rather than presenting an impersonal front to a large number. Thus, nearly half of corporate India now sources 80 per cent of its requirements from 20 per cent of its vendors, or sells 80 per cent of its output to 20 per cent of its customers.

By extension, several of your competitors have already begun streamlining purchasing procedures using long-term supply contracts. These are enabling their suppliers, in turn, to manage their supply chains more economically. The compulsions for producing more at lower levels of inventory and manpower are also forcing CEOs to make critical make-or-buy decisions, with mindless outsourcing giving way to strategic sourcing. That's why 83 per cent of companies have asked some, or all, of their suppliers to tone up quality procedures in the past 12 months. And manufacturing companies are focusing on shopfloor quality and ISO certification although services and marketing companies are yet to catch up here. That provides an opportunity to stay ahead of the curve through benchmarking instead of merely playing catch-up.

The Operational Benchmarks

Are you cutting costs furiously? Your competitors are. Are you focusing relentlessly on standardisation of systems as a means for achieving total quality? Your competitors are. Are you using activity-based costing to determine total costs? Are you involving your customers and suppliers in product design? Are you trying to crash cycle-times? Your competitors are. And if you ignore the benchmarks they are setting, don't complain of being left behind on the operational efficiency scales. Your costs will mount; you will follow your rivals to market instead of beating them; and your products will not meet your customers' requirements.

A far-from-silent revolution is transforming the innards of corporate India. Its reach extends not just to select pockets of the organisation, but up and down the corridors, departments, functions, and hierarchies. At one level, it represents the initiative of CEOs and managers in terms of capitalising on emerging management tools and principles. At another, it is a desperate attempt by corporates long cocooned in mediocrity--and confident of continued patronage from choice-bereft customers--to catch up with the global standards being imposed by world-class companies muscling in on their turf. To be left behind in this race can be fatal for your company. That makes benchmarking against the best in every corner of your organisation an absolute necessity simply not to be left behind. Thus, from partnering with customers to retooling the shopfloor, from using new accounting practices to state-of-the-art inventory management, there is no management tool that has not being wielded by at least one of the companies with which you compete for customers as well as suppliers. Their importance varies, but their usage is virtually ubiquitous. So it must be in your company, for survival.

The Infotech Benchmarks

Once the tool of automatising routine operations, infotech is beginning to be recognised by corporate India as a critical means for gaining a competitive edge through information management. If your company still thinks in terms of computerisation rather than creating and applying an infotech strategy, it is going to fall short of the leaders. No other weapon has increased its importance in the context of corporate strategy than infotech usage. To be sure, the transition is still underway, with the universe of companies polarised between committed disciples and tentative converts: but opting out of the flow will be dangerous.

That's why you can't afford to ignore the fact that 55 per cent of your compatriots have a formal infotech strategy in place, divided almost equally between companies in different sectors. For, that number is fast increasing, as the fact that 17 per cent are in the process of creating their infotech strategy demonstrates. And the bigger you are, the more you are at a disadvantage without a formal infotech strategy: at the Rs 1,000-crore-plus level, only three out 10 companies don't have one. Nor is it enough to merely draw up a strategy. To match the best, it should look between two and three years forward, rather than being focused either on the long term or the short term only.

More evidence of the growing importance of information management as a competitive weapon: the sidereal movement of the responsibility for heading the infotech function from the accounting and finance department to a director dedicated exclusively to that task. Of course, your benchmarking won't be complete till you've compared the use to which you're putting your hardware and software to those of what your competitors are doing. The standards vary across sectors: while marketing companies mostly use it for managing resource information, manufacturing and services companies still use it primarily for processing that information. Don't let the traditional users lull you into complacency, though. As the flow of data and knowledge around the corporation becomes a vital resource for competing in the new digital economy, staying on par with the best, rather than with the largest number, will privide you the edge that you seek.

The HRM Benchmarks

Three distinct developments are reshaping human resource strategy in corporate India today. The first is the growth of improvised services around the core of the basic product as a means of delighting the customer. The second is the use of knowledge--and the resultant rise of the knowledge worker--for competitive advantage. And the third is the reorganisation of companies around processes, which essentially involves using people as the pivot. Against this backdrop, managing people is the key driver for the success of strategies as well as operations, which explains why the extent of a formal hr strategy among 71 per cent of corporate India--another 12 per cent are working on it--is virtually a danger signal for companies that don't have one.

So, whether your company is in manufacturing or services, your benchmark is clear: get a hr strategy--more so if you're in the megacorp bracket, where 80 per cent of your peers and competitors are operating with formal systems, structures, and gameplans for finding, training, retaining, and getting the best out of their employees. Beware: they're putting their money where their hr strategies are, with the Rs 1,000-crore-plus corporations spending more than 3 per cent of their turnover on training, while people-led sectors like services and marketing are putting in between 1.50 per cent and 2.50 per cent. And that accounts for only training.

Learn from your competitors' usage of training too. Most of them are beginning to forge links between their training and their business strategy, which is natural in an environment of bottom-up empowerment where individual initiative is more likely to achieve results than top-down control and instructions. Today, training encompasses the imparting of new skills too as corporates furiously equip their employees with the knowledge required to adopt state-of-the-art techniques in manufacturing and customer service. That explains why companies report the greatest impact of training on productivity: if you aren't making strides on that front with your training, just follow the benchmarks.

The Finance Benchmarks

How are you cashing in on your balance-sheet? Monitoring the financial health of your company can no longer be limited to checking sales and profits growth--you must also benchmark yourself on efficiency of utilisation of capital and assets, as well as on return to shareholders. To be sure, cash-flows and return on sales still remain the most important yardsticks for bean-counters, but gaining in importance are measures like asset utilisation, return on equity, and dividends growth--all of which reflect your competitors' determination to add value and create wealth through their performance. Equally important, the realisation that improving the skill-levels of their employees can directly boost the bottomline is dawning on other companies. Make sure your CFO agrees.

For the benchmarker--that's you--therefore, the objective is to constantly calibrate his company's progress against that of his competitors and peers. And as this picture of a corporate India in search of global class reveals, neither the line of business nor size is a barrier to the quest for perfection. Whatever the industry you belong to, whatever the number of figures in your annual turnover, someone, somewhere, is doing something better than you are. The BT-AIMA survey of best management practices in the country has set your targets. Now it's up to you to train your sights on them.

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