Retention, culture and building products in non-urban India...

Sranamamitra talks about Sathyam's GramIT rural BPO project in a recent Forbes article and adds in her blog,

I would love to see more projects like this come about, get funded, and scaled in the commercial domain in India. I see rural / small town BPO as a very interesting opportunity for the next phase of India’s evolution as the world’s back-office

While undoubtedly true, her assertion does a mild disservice to a slew of entrepreneurs, who have already begun doing this, not just in BPO/KPOs but for tech software as well. Mainstream business media in India is still caught up with how many bodies a company has ("TCS plans Pune campus, to hire 10000") or how many million dollars they are going to invest ("Nokia Siemens to invest $100 m in India!") So the Sathyam story while definitely worth telling (and yes big firms can have bigger impact), it's the little guys who are leading the way. Entrepreneurial firms in India have been innovating in their business models, organizational development and culture, over the last decade by going to Tier 2 and smaller towns. Two such efforts that I have had first hand experience and knowledge of include an engineering development center in Vellore and Integra, a provider of pre-publishing services in Pondicherry.

Before I talk of these folks' experience, (better yet invite them to talk about it, to take a leaf out of Sramana's blog :-)) it is worth addressing one other question. A commentator on the original post asked,

Maybe you can comment on why Indians in 3rd or 4th tier cities would work for $1200 when they could move to a Tier 2 city and make many times that.

People in India, actually work in smaller towns (many times at or near their hometown) for the same reasons, that people want to work in South Portland Maine, or Kalispell, Montana - that they are not the Bay Area or Boston, where though the salaries are higher so are the house prices and commute times. And of course folks who work in small towns usually have (extended) families near. [Outdoor sports, unfortunately in most Indian small towns are yet to bloom unlike their counterparts in Montana and Maine :-(]

In both these companies the founders and operational managers discovered what Hal Rosenbluth (in his book "Customers come second") found when they set up their first backoffice in Linton, North Dakota. In his words - "a pattern of quality work, with no absenteeism and no turnover. [...] morale was high and that office was the epitome of teamwork." Granted Bangalore firms such as Zoho and earlier our own firm Impulsesoft have successfully built teams, sustained teamwork and retained folks through downturns and pay freezes/cuts, but the pressures of the big city exist as in the Bay Area. And in many ways everyone else has settled for 14-15% employee churn as normal.

It is possible to get away from this is what the folks operating outside Tier 1 and even Tier 2 cities have discovered - a motivated, eager to learn and committed, albeit at times inexperienced, workforce. One of the managers in Vellore stated it as, "People still have old fashioned views of work and contribution. Any engineer who moves to Bangalore whether he gains experience or not, gets an entitlement attitude within the year."

SNS Datascribe is another firm that I have come across recently, operating successfully for several years from the outskirts of Coimbatore. Anu and Sriram at Integra have grown from strength to strength operating out of Pondicherry. I will try to bring their voices to this discussion directly.

A Stake in the Outcome - Building a Culture of Ownership

These last six months, I have been doing a good deal of reading; on average maybe two books a week - at least one of which has been a business book! I have gone back to reading books that have been in my library a long while such as Paul Hawken's Growing a Business as well as reading new (to me) ones such as A Stake in the Outcome by Jack Stack and Bo Burlingham.

I ran across A Stake in the Outcome (ASitO) while browsing business books at the Easy Library (a great online library with a brick & mortar presence in Bangalore). Having read and been influenced by Bo Burlingham's more recent Small Giants, I began browsing ASitO at the library itself. As the saying goes, "When the student is ready, the Master will appear!" Certainly that's how I felt as I scanned the book quickly right there and subsequently brought it home to read.

Chapter 3 titled The Design of a Business, begins:

Most people, I know, don't think about the company they're designing when they start out in business. They think about the products they're going to make, or the services they're going to provide. They worry about how to raise the money they need, how to find customers, how to deal with salespeople and suppliers, how to survive. It never occurs to them that, while they're putting together the basic elements of the business, they're also making decisions that are going to determine the type of company they'll have if they're successful.

I felt someone had just hit me on the head with a two-by-four. Every week I meet someone who is thinking about starting something. Nearly every last one of them talks about their product or service idea and if at all they talk about their company, its only when they intend to "flip-it" ("Built-to-flip" as Jim Collins speaks of as does Sramana Mitra in a recent blog entry). Jack Stack in contrast, states clearly that

Ownership Rule #1
The company is the product

It is worth pausing here and reflecting on his assertion. All too often I see entrepreneurs, young and not-so-young, pitch their businesses as I have heard Hollywood scriptwriter's do! "Think Netflix but for Indian movies," "Waiter.com meets iTunes," "Google but for contextual search." I'll refrain from speculating whether the internet bubble begat this or this begat the bubble and what role VCs had to play in this. This focus on what a company does, rather than what a company will be, Stack asserts misses the opportunity to explicitly design your business from ground up. If you haven't figured it now by now, I agree whole-heartedly.

In many ways, the practices of visionary companies that Jim Collins and Jerry Porras discuss in their book Built to Last have been explicitly operationalized in Stack's company Springfield Remanufacturing (SRC). The big difference is that Stack's direct writing style and first-hand experience makes this a gripping read rather than an dry business book. Also unlike most business books that appear to document management's clever (often infallible) strategies, Stack walks us through both the good and poor decisions they made, as they set out to remake SRC. In the end (in fact in the epilogue), Stack quotes Herb Kelleher, cofounder and former CEO of Southwest Airlines responding to The Wall Street Journal's question on what he meant when he said Southwest's culture was its biggest competitive advantage.

"The intangibles are more important than the tangibles," Kellher replied. "Someone can go out and buy airplanes from Boeing and ticket counters, but they can't buy our culture our espirit de corps."

ASitO walks us through SRC's journey of building such a culture of ownership from that day in 1982 when Stack and his managers did a management buy-out of their struggling engine remanufacturing factory to twenty years hence when their 10cent stock was worth $86 (since then has grown to over $136). Most importantly the authors don't romanticize the journey and are explicit in periodically setting our expectations with insights such as "Stock is not a magic pill" (ownership rule #4) and "Ownership needs to be taught"(OR #7).

ASitO is a must-read for any one contemplating starting a company or looking to effect change in their organizations through employee participation and a culture of ownership.

A much more detailed summary of the book itself can be found here

Hiring for Skills, Talent AND Values? One Story

In a recent Forbes article, Nathan Bennett and Stephen A. Miles state,

Repeatedly we hear from executives that the talent pool is not nearly as
challenging to navigate as is what we have come to call the "values pool." We
suggest that, [...], the real shortage facing companies in the future will be less
about finding individuals with the knowledge, skills and abilities to do the job
than about finding individuals whose personal value system provides a fit with
the company's values and mission.

Anyone who has run or worked in a startup knows how true this is. In our own startup Impulsesoft, at the very beginning (circa 1999) there was no such separation of values and talent. When you are less than eight people, everybody better be able to pull their own weight - but then again the reason you do a startup (at least the reason we did) is to work with people who share your values and vision. It's when you try to begin hiring beyond the first few - the core team, the importance of values becomes real apparent. We went through four distinct phases in our startup -

[i] can we get anyone else to even join us?
we got started without a lot of forethought or planning. We even got our first customer signed up, before we bought our first computer. Now there was the minor matter of actually doing the work. It dawned on us then that with no money, no office and no clear grand strategy could we even get anyone else to join us. We talked a good story I can tell you that - but when our first prospective employee's dad showed up to check us out, we knew we had a challenge on our hands. However values were paramount at this phase, as we felt we had the talent to get the job, any job, done!

[ii] lets focus on bringing only these three/four folks on board
Once we had our share of new college grads (NCGs) come by, wisdom bloomed. We were not going to be able to do it all - hustle customers, write proposals and actually write code - let alone direct the still not-steady-on-their-feet NCGs. By now we'd been talking to ex-colleagues who shared our values and skillwise walked-on-water; they saw that we were not yet dead and realized there might be something here after all. Suddenly we had a core team, that was incredibly talented and well aligned.

[iii] how fast can we hire hands & bodies and bring 'em on board?
Suddenly we were a real business, with customers signed up for products we hadn't built yet, and paying customers expecting us to support them with prototypes we had shipped as product. The software managers wanted more coders - the hardware folks more designers and everyone wanted more testers - we just went crazy trying to find the "talent pool" - if you could walk, string a set of C code together and didn't drool excessively, we hired you! Even the talent bar probably got shaky in this phase.

[iv] what the hell where we thinking in phase [iii]
When products still didn't work as advertised and customers were no happier, having paid up even more money and our own managers ready to kill some of their staff, we began wondering what the hell had we been thinking? The questions now were how do we let go of these folks and get folks with the right values and attitude even if we have to teach 'em the right skills? The lesson we learnt was that though we had hired talented folks, they had come up real short in both attitude and vision alignment. Our hiring process about which we had become quite proud (It's hard to get hired at Impulsesoft, we'd say) had become too much talent focused and too little value focused in phase [iii]; the fact that I am writing this today means we learned from this and while it hurt us, it didn't kill us. But then again that's the sort of lesson that stays with you. Bennett and Miles are right - only the future is here NOW!

Culture in Companies and Business Success

In November 2007, in what's becoming an annual event (okay, it was two years in a row), I attended a workshop titled "Values-based Leadership" lead by Richard Barrett. Despite the slow start, and initial misgivings when Richard quickly put on a video of his that's available on YouTube (hey, I have come to hear you in person, was my first thought) - the day proved to be thought-provoking and productive, for two reasons. Firstly a full day away from the daily grind at the office, just thinking and discussing things from the sublime, (Who am I? What is my purpose in life?) to grimy reality (What is the culture in your company?) was a much needed breath of fresh air. Secondly the workshop turned out to be completely about culture, ways of measuring it and the role culture and values play in the business success of organizations. Many thoughts that had been stewing below the surface of my conscious mind or even the few that had cleared the surface and were still nebulous at best, began to get some definite shape and dare I say, validation through the course of the day.

Before I push ahead, its worth stepping back and trying to get a working definition of culture spelled out. Many serious thinkers have come up a variety of definitions - ranging from the anthropological all the way to organizational - I will confine myself to the rather simple assertion, that culture is how people in an organization behave and expect others to behave, on a daily basis. This behaviour is almost always driven or at the very least most strongly influenced from the top, down. In other words the leaders (in small enterprises these are almost always the founders) set the culture and the everyday actions of the people in the organization reinforces this culture. Here again, I use the term actions to include explicit inaction or lack of action as much as deliberate actions taken. For instance, not confronting (constructively or otherwise), or avoiding conflict is as much an element of organizational culture as action such as yelling at your subordinates or sharing recognition and praise as well.

In the spirit of full disclosure I should also state my position - that I believe that culture trumps all other considerations in building healthy, dynamic and long lasting successful organizations. Yes, all those things we learnt in business school or at our fathers' knees are still true - operational excellence, technology and R&D, financial performance, killer products or services are all important for success but culture is critical to sustain and build upon the gains made. After six years of running a boot-strapped software company, from the giddy optimistic start, through axing one entire department and having those folks out-placed, asking the remaining team to take 10-15% pay cuts, even as we worked to deliver newer products, fend off competitors and keep those fickle customers who hadn't yet gone out of business in the downturn or been gobbled up , to achieving market leadership in our niche and finally selling our own company, the number one insight I have gained is that culture is the critical ingredient for organization success.

In the coming weeks and months I hope to share some of the lessons I have learnt from my journey as an engineer, manager, CEO and general factotum (they are nearly the same thing, you sometimes have a little more freedom as a factotum) and in the bargain, I hope to learn as well. The journey continues!