Business and HR Part 1: Is "Corporate Socialism" killing businesses?

Most Indian organizations and foreign companies operating in India could have done better than what they are doing. There are many reasons for suboptimal performance of organizations, across business, Government and NGOs. These are lack of appropriate capabilities, lack of training and development, lack of leadership, improper risk assessment, inappropriate strategy or business model. Different companies are plagued with some or a combination of these issues. All of us know that even if strategy or business model is slightly defective or if the risk was not properly assessed, the key to success is excellent execution. However, most companies demonstrate lack of excellence in execution. What is the root cause?

The primary reason for lack of excellence in execution is "Socialism at Work", which cuts across most companies in almost all sectors in Asia and especially in India. If the organizations reward the high performer and low performer similarly, what is the incentive to perform? Even worse, the organizations do not give differential treatment to performers, in terms of opportunities, resources and recognition and appreciation.

What should companies do to enhance performance?

DIFFERENTIATE through:

1. A very transparent PMS process with quantified goals.

2. Capability of managers to call a spade a spade. 

3. Leaders own differentiation of performance and drive it though the year.

3. Very high differentiation in variable pay and increments between high and average performers.

4. The developmental and growth opportunities for the high performers, which should be distinct from those available to average performers.

5. Superior resources to high performers in order to help them be more productive and effective. This would ultimately help business perform better.

In Government sector the option to differentiate is limited. Therefore motivation  to perform is limited.

Some of the public sector companies, especially banks, have used differentiated opportunities and resources as key drivers to motivate high performers and help them deliver better. These organizations have excelled compared to their peer group. Their ability to influence or effect differentiation in compensation was limited.

In Private Sector all the levers are available. But the will to create differentiation is lacking in most organization. The challenge becomes bigger when CEOs do not want to differentiate, little realising that this will hamper the business performance and consequently their own performance, and may be survival. 

In an environment of Corporate Socialism, high performers are frustrated and leave for greener pastures. This leaves the well rewarded mediocre talent behind, resulting in a mediocre organization and mediocre business performance.

Leaders have to choose between socialism and high performing businesses.