Thursday, September 27, 2012

How Top Management Can Confuse and Hence Harm the Organization?

Top management can make or break an organization. The control exercised by top management on the following two things has substantial and significant impact on the future and very existence of the organization - organization's direction and resource provisioning.

Organization's Direction
  • Others need to go in the direction that is in line with the business strategy conceptualized and articulated by the top management
  • Direction could be in various forms:
    • Revenue model and gross margin target
    • Products and service offerings
    • Company policies
    • Organization-wide initiatives
Resource Provisioning
  • Others are granted resources to perform the assigned activities to achieve the organization's objectives that are linked to the stated business strategy
  • Resource could be in various forms:
    • Budget allocation
    • Expense approvals
    • Organization structure and staffing
    • Hardware and software resources
Top Management Can Confuse and Harm

At times the top management can cause substantial and significant harm to the organization by confusing others in respect of direction and resource. Here are some examples of this:
  • The CEO keeps on telling that an initiative needs to be started urgently but will find one reason and then another to keep on delaying it.
  • The CEO announces in a public meeting that "we want the value and will do something in the right way regardless of the time it takes" and then tell the key stakeholders in a private discussion that "come what may the time set needs to be met at any cost"
  •  The CEO talks about open culture in every meeting but doesn't encourage direct and tough questions from the employees
  • The CEO talks about importance of complying to governance mechanisms and company processes in each and every case, always but is fine with selective exemptions at his level
  • The CEO talks about empowerment and meritocracy but defines an organization structure where those reporting into him are his trusted lieutenants
  • The CEO talks about engagement and involvement but has a hands-off approach to managing the company affairs with the help of the trusted lieutenants
  • The CEO talks about progressive culture and HR practices but allows growth in the organization at a level strictly below the trusted lieutenants
How Can Top Management Avoid Confusing Others

The ways to ensure these are simple and have their basis in what makes a human being a "good human being" and an "effective leader". Here are some such ways:
  • Possessing business acumen and strategic clarity
  • Being ethical and genuine
  • Being competent and well-informed
  • Having compassion and care for others
How Top Management and Others Can Work Together Effectively

It must be remembered that the top management and the others are human beings at the end of the day. And hence they have their strengths to play with and weaknesses to guard. The interaction between top management and others should not be in competing mode but collaborative mode.

Working in an organization should not be seen as a cat and mouse game but the coming together of many minds to create something useful for themselves and for the society. 

Does a Mid-career Full-time 1-year MBA have a Negative Financial RoI?

Everyone experiences mid-career blues in her career. And one way people (who didn't enter the corporate world with an MBA degree) think they overcome these blues is to get an MBA degree.

Mid-career MBA Dilemma

Since we are talking about a business management course here it is worth assessing whether it makes business sense to get a business degree. What is the likely RoI (return on investment) of an MBA? Does a mid-career full-time 1-year MBA have a negative financial RoI?

Case of Mrs. X - Should She Do an MBA or Not

Let's consider a certain Mrs. X entered the corporate world when she was 25 year old and plans to retire when she turns 55 (hence the career would span for 30 years). After working for 10 years Mrs. X decides to do a 1-year full-time MBA. The big question would be: Does a mid-career full-time 1-year MBA have a negative financial RoI?

Let's assume a few things:
  • Mrs. X will work for 20 years post-MBA
  • The cost of MBA is Rs. 2600000 (26 lacs)
    • It is also assumed that Mrs. X has this readily available in cash and will not be needing an education loan. If an education loan in considered the financial RoI is negatively impacted
  • If the MBA Cost is kept in a bank FD (Fixed Deposit) it can earn post-tax returns at 6% interest rate compounded annually
    • It is also assumed that this money lies in the FD throughout and earns interest on compounded basis year after year
  • The current salary of Mrs. X is Rs. 2400000 (24 lacs)
  • Mrs. X expects to earn 8% salary hike every year
    • It is also assumed the %hike will remain same before and after MBA. The reason is that an MBA can't change the inherent competencies and performance level of an individual. An MBA can help get a one-time major salary hike but the future hikes will depend on the person (and an MBA program can't change a person at a fundamental level).
  •  Mrs. X expects to get a one time 50% hike
Given the above scenario what is the likely answer to the question: Does a mid-career full-time 1-year MBA have a negative financial RoI? One might think it can't be a "yes" but an insightful analysis reveals that it is actually yes. See the table below for the details of calculations.

And here's the chart showing the trend of Money W/O MBA, Money W/ MBA and Net INCOME. It clearly shows the returns over a 20 year period is always negative and in fact, keeps getting worse year on year.

So does a mid-career full-time 1-year MBA have a negative financial RoI? The answer is yes. The financial RoI of doing a mid-career full-time 1 year MBA is actually negative. Thus going by purely financial RoI perspective Mrs. X should not do an MBA.

Reasons Other than RoI for Doing or Not Doing an MBA

Though Mrs. X realizes that the financial RoI of doing a mid-career full-time 1 year MBA is actually negative there are still many other reasons she can go ahead with the MBA. Here are some reasons why MBA may have RoI in other aspects (non-financial in nature):
  • Get break into an area one always wanted to work but couldn't. An MBA degree can open certain doors that were closed before
  • Feel good about oneself by virtue of the esteem value generated in flaunting the MBA degree. An MBA degree is a great label to have on one's resume, any day
In the process of the benefits that might accrue to one certain things might get lost. Here are some of those:
  • Technical or functional competency before MBA may count for little or nothing. Also the grass always looks greener on the other side. One might get an MBA and realize that she was comfortable and enjoyed a role with more technical content as compared to a role with more managerial content
  • One would always have the disadvantage over someone who entered the corporate world with an MBA degree. An MBA degree with 10 years experience after that is not equivalent to an MBA degree with 10 years experience before that

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