Cons Ilium

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FOREWORDDear Reader, Warm greetings from the Consulting Club, Faculty of Management Studies! As goes the famous saying, let change be the rule but not the ruler, current times amidst volatility and concerns over slowdown call for vigilance and action. As it challenges economies and industries globally, it also provides innumerable opportunities to accelerate growth in near future. In light of the same, The Consulting Club presents the next edition of Consilium focused on opinion of faculty, students across B-schools and professionals regarding the current scenario and its potential impact on a diversity of sectors. Looking forward to receiving your feedback and invaluable suggestions to help us make the journal better and more informative. Feel free to write to us at conclub@fms.edu. Hope you enjoy reading it.

Dr. Jagriti Gupta President, The Consulting Club, FMS Delhi

EXECUTIVE MEMBERS K. Ashok Chakravarty Prannay Vats Rohit Chaudhari Seher Contractor

ASSOCIATE MEMBERS Aastha Sharma Aditya Gupta Aravindodar Reddy Mridul Gandhi Naheed Shoogufan Nikhil Nathani Pratik Singhania

CONSILIUM

FMS DELHI

Rewiring HR Page 1

The Rising: Part 1 Page 5

Restructuring of the organised industrial sector Page 9

Gaining A Value Creation Advantage in Volatile Times Page 11

Interview with Mr. Arsh Maini Page 14

Business of climate change Page 17

Marketing in the times of recession Page 20

FDI in Retail: Risk or Value Creation Page 25

Gaining a Value Creation Advantage in Volatile TimesThe Banking Sector Page 30

How Efficacious Team-Work in SCM can help Organizations gain Value Creation Advantage in Volatile Times Page 34

Business Strategies for Sustainable Innovation Page 37

Changing Face of Consumer Goods and Retail in volatile times Page 44

NS Raghavan co-founded Infosys and is currently the chairman of the advisory council of the N S Raghavan Centre for entrepreneurial learning at IIM Bangalore

REWIRING HR

Smart ManagerSustained long-term growth for any organization can be achieved only by effective human capital management strategies. However, developing effective strategies is becoming more and more challenging given the increasing complexity of human behaviour. Fortunately, neuroscience and brain research have started providing us great insights into the workings of the human brain. Our brains, in computer parlance, are wired in three different ways. The hard-wiring, which is genetic and inherited, controls to a large extent, our individual traits, preferences and dispositions. The firmwiring that is shaped by our childhood environment stores away social and emotional lessons from our early years. Finally, the brains soft-wiring is shaped by our formal and informal education, observations and experiences which get continually updated thanks to the neuroplasticity of our brains.

Influencing Social BehaviourOrganizations striving to get the best out of their people can therefore obtain optimal results by consistently fine-tuning the soft-wiring of its people. This is best done by a strong organization culture that promotes the right kind of values, attitudes and behaviors. It is well established that good or bad behaviour is contagious, which makes it important for all senior leaders to reinforce a cooperative, collaborative and healthy organization culture by their exemplary display of right behaviour. That bad behaviour begets bad behaviour is well proven by a series of experiments in Groningen in the Netherlands designed to test the broken window theory. The theory posits that if someone sees, say, graffiti scrawled on a building wall, he or she will be tempted to do the same or commit some other illegal or mischievous act. In fact, sociologists often cite this theory to explain the substantial drop in crime experienced in New York City in the 1990s after the city authorities took the initiative to scrub the graffiti out and clean all buildings, trains, buses, walls etc. Similarly, observing a senior leader publicly blaming an individual in an organization for a problem is adequate to greatly increase such practice in the organization, which can spread with the tenacity of an epidemic, according to new research from the USC Marshall School of Business and Stanford University.

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Stranglehold of human biasThere is widespread acknowledgement that the coping behaviours that we all learn during our childhood have great strength and persistence, and, more critically, we can change such behaviours only with considerable amount of effort. What is stored in the brains firmware is the subconscious cataloguing of stratagems that did or did not work for us while we tried to cope with our environment during our childhood. These beliefs are so strongly embedded in us that they become our subconscious behaviorcontrolling programming. Let me give you an idea of the stranglehold that our internal belief systems have on our thinking and behavior. The evidence is overwhelming that something in the way our brains function causes us to be biased - and makes us respond to ideas impinging upon existing beliefs irrationally and quite often emotionally. Further, whenever our beliefs are opposed, our biases drive us to become polarized to migrate to an extreme position. Bertrand Russel had the wisdom to appreciate this behavioral underpinning when he remarked, It has been said that man is a rational animal. All my life I have been searching for evidence which could support this. What I need to emphasize here is that we do not rationally choose to persist in blind, one-sided views of those things that we believe in. We also do not choose to become upset and angry when our beliefs are challenged. Our internal programming compels us to do so without our explicit awareness. Timothy Wilson of the University of Virginia in his book Strangers to Ourselves argues that our unconscious minds are inaccessible to self-analysis, no matter how hard we try. Stanford professor Leon Festinger introduced the concept of cognitive dissonance: the more committed we are to a belief, the harder it is for us to relinquish the same, even in the face of overwhelming contradictory evidence. This dissonance does not permit us to acknowledge that there was an error in our judgment and therefore there is a need for us to change our opinion. On the other hand, this cognitive dissonance encourages us to develop a new attitude or belief that will somehow justify retaining our existing beliefs. Professor Steven Hoffman, Buffalo University has proposed that the cognitive theory of motivated reasoning makes us bypass any rational evaluation of a new or contrary belief and instead encourages us to seek out information that supports and con firms what we already believe in. For the most part, he argues, we will completely ignore information that does not support our beliefs.

Social needs trump rewardsAll organizations strive to develop appropriate kinds of reward and incentive systems to keep their employee motivation levels high. Brain research is questioning the basis of such reward systems. The primitive part of our brain (called the limbic system), which we share with animals, is programmed to respond with a minimize the danger or maximize the reward plan when aroused. New research is pointing out that this neurological mechanism of threat and reward response is as strongly triggered in social situations as it is in physically threatening situations. Measurements of brain activity taken through fMRIs, EEGs or hormonal secretions demonstrate that the very same neural responses that drive us either away from predators or towards food are equally at work when we are treated harshly by seniors or encouraged by others in the organization. These studies suggest that the brain equates social needs with basic survival demands, raising their importance beyond monetary and other rewards. More critically, financial rewards and incentives are effective only when they are perceived to support social needs. Neuroscience also suggests that organizations that try to pit people against one another on the theory that competition will make them work harder unfortunately reinforce the notion that there can

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only be some winners but many losers. Such a feeling evokes a threat response that completely undermines the morale in the workplace. In his excellent article Managing with the Brain in Mind, David Rock says that [r]esearch into the social nature of the brain suggests that five particular qualities enable employees and executives alike to minimize the threat response and, instead, enable the reward response. These five social qualities are status, certainty, autonomy, relatedness, and fairness. His article has suggestions on positively influencing these five parameters. I will just touch upon one social quality, fairness, which I believe is the most impactful.

Emotion and fairnessThe perception that an event has been unfair generates a strong response in our limbic system, stirring hostility and undermining trust. The cognitive need for fairness is so strong in us that we will be willing to ignore other negative factors. There are examples of employees staying for more than 25 years with a company simply because they felt that their organization always did the fair thing. Neuroeconomics, a combination of Neuroscience and Economics, demonstrates that the brain is hardwired to handle some economic problems through emotion rather than number crunching. Interestingly, it has been found that human brains seem to respond with special emotional vehemence to social cheating. Let us examine what happens in our brains when we make an economic decision. We tend to believe that we calmly weigh the alternatives