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Value based mgt

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  • 1. Indian subcontinent since time immemorial has been the abode of spiritual bliss. It hasshown the light of wisdom and harmonious peaceful coexistence to the rest of the world.But as the time passed by, with the influence of materialistic western lifestyle, Indiansociety is now characterized by degradation in values and moral standards. In a recentsurvey by Transparency International, India tops the list in the Payment of Bribe Index andis also adjudged as one of the most corrupt countries in the world. Business is a part andparcel of the society and is also no exception.Traditionally, businesses have placed the highest priority on making money – concern foremployees and human values has typically received less attention. This is evident from theNorwegian term for business administration: "Økonomi og ledelse" which puts "economics"before "leadership". In a Financial Times (June 7-8, 2003) interview, even the grand oldman of conservative economics- Milton Friedman – concedes "The use of quantity of moneyas a target has not been a success". Inline with this, a 2003 survey by the Argument Group,found that three out of four Norwegian executives reject that a corporations soleresponsibility is to give the owners the biggest possible profit.Money, therefore, is not the only goal of business – in fact it is not the major goal. Money isneeded for everything in the world, but it is not enough for living a really good life. Manneeds a purpose beyond money. A 2004 survey by Roffey Park & Management Today of 750managers and board members found that close to 70% of them were searching for a deepermeaning in their job.In contrast to money driven businesses, value based organizations practice leadership andmanagement through shared productive and ethical human values. Within this broadframework, self-managing individuals can be left to experience and display high levels ofmeaning, enthusiasm, initiative, creativity, integrity, happiness and self-organization – forthe benefit of themselves and their corporation. Such organizations realize and liveaccording to the principle that their associates are their greatest assets. The basic conceptof putting man first is beautifully expressed in the German philosopher Immanuel KantsThird Categorical Imperative: "Act so that you treat humanity, whether in your own personor in that of another, always as an end and never just as a means. "Of course, value based management also includes making money. It is not a question ofeither man or money. It is a quest for both happiness and profit. Research shows that valuebased or visionary companies perform on a markedly higher level – they earn much moremoney – than merely profit-based companies. In the above backdrop, the present article isprepared with the following objectives:-* To throw light on what is value based management.* To provide ideas on why to use value based management.* To give details on practices and procedure on value based management.* To throw lights on value based management in Indian context and attempts to highlightthe VBM in three different sections.Section-I deals with the concept and historical perspective, Section-II highlights thedynamics or implementation process and the Section-III reflects VBM in action and theconclusion.SECTION-IValue Based Management has been defined in different ways:
  • 2. Value based management is the management approach that ensures corporations arerunning on values (normally maximizing shareholders value). Value based managementincludes all the three of the following:* Creating values (ways to actually increase or generate maximum future value, strategy).* Managing for values (governance, change management, organizational culture,communication, leadership); and* Measuring values (valuation).Value based management aims to provide consistency of the corporate mission (businesspolicy), the corporate strategy, corporate governance, corporate culture, corporatecommunication, organization structure, decision processes and systems, performancemanagement processes and reward processes and systems.Value based management can be simply stated as management system in which entireorganization is focused, measured, compensated for creating value for stakeholders (i.e.,customers, shareholders, employees, vendors). Value-Based Management (VBM) is acustomer-focused system built upon shared principles and core values, which is designed toinstill an ownership culture within an organization.The value based management is managing and giving values to all stakeholders. They areas follows-ORGANISATION* Encouraging a working climate with innovation & free exchange of ideas.* Demonstrating personal integrity & humanity.SHAREHOLDERS* Protecting and safeguarding their investment.* Ensuring them a fair returnEMPLOYEES* Understanding & acceptance of the needs and rights.* Providing adequate wages, good working condition, job security, effective machinery forspeedy redressal of grievances.* Suitable opportunities for promotion and self development.* Creating a sense of belongingness & team spirit through their close link withmanagement.CUSTOMERS* Products with proven quality at fair price.* Fulfilling its commitments impartially and courteously with sound business principles.GOVERNMENT* Confirm national interest as mentioned in government policy.COMMUNITYSocial responsibility-* Effective use of natural resources* Assistance in community affairs.* Assistance during natural hazards.
  • 3. VALUE BASED MANAGEMENT: A HISTORICAL PERSPECTIVEThe history and development of Value Based Management (VBM) and the growth of internaland external corporate complexity over time are highly interrelated. This is only logical ifone realizes that VBM is basically a philosophy enabling and supporting maximum valuecreation organization.Before the industrial revolution, companies were relatively small and their internallycomplexity was low. Also the external environment of companies was relatively stable andclear. Value creation was relatively straightforward, simple and obvious. There was no needfor VBM.IMPLCIT VBM (1800-1890)The earliest forms of implicit "VBM" dated back to the end of the 18 th century, when, bymechanizing and by the Industrial Revolution, it was possible to achieve economies of scalethrough investing in machines and hiring workers. The dislocation of facilities made directsupervision harder and insight into the efficiency and productivity of the production processbecame more important. During the19th century, these methods gradually improved, usingimproved transportation and communication mechanisms available. These systems wereaimed at promoting and evaluating the efficiency and productivity of decentralizedproduction processes and not on measuring and managing value creation as such.EXPLICIT VBM (1890-2000)At the end of the19th century, Alfred Marshall sees profit as the residual income accruing toa firms owner, a return to the investment of his own capital and to the pains he suffers inexercising his "business power" in planning, supervision and control. Frederick Taylor(1911) and Harrington Emerson develop Scientific Management (using detailed physicalmanufacturing standards, enabling a simple translation to financial standards).Corporations become more complex with a diversified product assortment and activities.Allocation of assets over the various activities and as a result, better information on theseactivities becomes more important. Management Accounting introduces Return onInvestment (ROI), at first, only at top management level for allocating resources andjudging performance.
  • 4. In 1938, Grant makes some references to using the time value of money for decidingamong investment options. In 1954, Dean publishes an article in the HBR about use ofDiscounted Cash Flow (DCF) practically for valuing investment proposals and otherdecisions. Later, also methods are introduced such as residual income, responsibilityaccounting and transfer pricing.Professional Investing – In 1964, Sharpe introduces the Capital Asset Pricing Model (CAPM)and in 1973 Black and Scholes introduce their formula for calculating the value of financingoptions.In 1964, Peter Drucker writes "Managing for Results" and in 1986, Alfred Rappaport writeshis ground breaking book "Creating Shareholders Value". In 1994, Jim Taggart uses theterm "Value Based Management" in his book "The Value Imperative: Managing for SuperiorShareholders Returns". From now on, thinking in Shareholders value term is firmly rooted inbusiness and corporate strategy.SECTION-IIIMPLEMENTATION PROCESSAs a company implements Value based management, it will need to accomplish three steps:gain senior team commitment, customize the VBM framework, and finally, makes VBM away of life in the organization.GAINING TOP MANAGEMENT COMMITMENTVBM is similar to all other initiatives in one respect. Senior management needs to supportVBM with their words and ultimately with their actions. It is up to the senior team to createa sense of urgency around the initiative and clearly communicate a vision of the impact thatVBM will have on the organization. In short, they must make the reasons for VBM simple,clear and compelling. Anything less than the full commitment of the senior team willultimately cause the initiative to fail and simply become, another "Program of the month",that does not achieve the intended results. The organization will spend a lot of time, moneyand energy without receiving adequate returns from the VBM investment.DEVELOPING A CUSTOMISED VBM FRAMEWORKImplementing VBM requires an organization to redesign its management practices. The keymanagement practices are performance measurement, compensation design,planning/budgeting and training and communication programs.* Performance MeasurementThe first step in customizing a VBM framework is to abandon accounting based metrics anddefine a value-based measure, such as economic profit, as the key performance metric ofthe company. The overarching goal is to improve economic profit over the long-term. Whena firm takes the long –term view, it is imperative to act in an ethical and socially responsiblemanner. Anything less may improve short term prospects but will not lead to long-termsuccess.
  • 5. Less is more when defining the measure. While the measure needs to be grounded infinancial theory, keep the complexities to a minimum. Remember, if improving economicprofit is the goal of the organization, then people need to understand how it is calculatedand ultimately how they can make decisions that improve economic profit.* Compensation DesignIf the incentive plan is not adequately tied to value creation, a disconnect will occurbetween the creation of shareholder value and the managers compensation. Thisdisconnect may cause the actions of the managers to not be in the best interests of theshareholders. Some key characteristics of value-based incentive plans compared totraditional plans are uncapped bonuses, targets based on market expectations, and the useof a bonus bank. A plan with these characteristics encourages participants to think like, actlike, and be paid like owners.* Integrating Performance Measures into planning frameworkThe new performance measure needs to be at the heart of key management processes,such as budgeting, planning, and capital allocation. A good exercise during the budgetingand planning process is to have business units calculate what level of bonus will be paid outif projected performance is met. This is an excellent way to move from a "manager" mindsetto an "owner" mindset. When organizations do not consistently make decisions using thenew performance measure, a mixed message is sent to the organization about theorganizations overarching goal. This mixed message will lead to confusion about what thekey objective of the organization is.* Initial Training and Communication PlansThe organization needs to develop a plan and the necessary material to communicate theimportance of managing for value and the basic concepts of VBM. People in the organizationneed to understand the basics of economic profit before they can be able to apply theconcepts to daily decisions. An organization needs to develop a new reporting package thatis easily understood by finance and non-finance employees alike. The results need to becommunicated visually, timely, and accurately.The initial training provides the opportunity for employees to understand new concepts andbegin to develop ideas around how they can make decisions that are more in line with valuecreation. Communication of results will provide the necessary feedback to the organizationabout how their actions are impacting shareholder value. Lack of feedback on how actionsare impacting value will disrupt the learning process, signal a lack of importance around theinitiative, and ultimately cause the initiative to lose momentum.MAKING VBM A WAY OF LIFECompanies must integrate VBM into their culture. VBM cannot be thought of as just aninitiative but rather as a way of life. VBM needs to become a part of the drinking water, soto speak, meaning we have to turn our efforts to ensuring that everyone in the organizationunderstands his or her role in creating value in the organization. This begins at the top ofthe organization and needs to be cascaded down the entire organization so each individualunderstands the big question, "How does our company create value?"—and the even morerelevant question, "How does my role and the daily decisions that I make impact value?" Toreach this level, the organization will need to devote a significant amount of resources to
  • 6. provide the necessary learning, tools and feedback required so all individuals canunderstand their role in value creation. If you can lead your company to a place whereeveryone in the organization can answer the above questions, you are well on your waytowards developing a culture focused on value creation.Value-Based Management is an ethical framework for succeeding in business. As such, VBMbalances moral values with material values.Value-Based Managements three notions of value are:* A foundation of shared ethical values—starting with the belief in the intrinsic value ofeach person (each employee, customer and supplier).* Success in the marketplace based on delivering maximum value (higher quality atlower prices) to the customer.* Rewards based on the value people contribute to the company, as individuals andas a team, as workers and as owners.The ethical and material aspects of value can be realized in a business by:* Creating structures of corporate governance and management based on shared moralvalues, as expressed in a written set ofa. company core values (ethical principles which define the culture and clarify the socialpurposes of the organization); andb. a code of ethics (a set of habits to be encouraged to guide individual behavior towardstrengthening the companys culture and interpersonal harmony).* Ideally these core values and code of ethics are agreed upon by consensus by everyperson in the company, and are subject to periodic review and improvement (as withHerman Miller Inc.s "renewal process"). These serve as the "compass" for guiding corporateobjectives, policies, and other decisions; they also provide a basis for judging peoplesbehavior.* Maximizing value for the customer (those being served), by increasing quality and/ordecreasing price. (This relationship can be expressed as V=Q/P.) Within a VBM culture,everyone in the company recognizes as a primary core value "service to the customer;" notonly because as a person, each customer deserves to be treated with dignity, but becauseultimately it is the customer who "signs" every employees paycheck. V=Q/P thus becomesthe simple formula for any business to follow to succeed in the competitive marketplace.VBM is designed to "institutionalize" shared responsibility, shared risks and shared rewardswithin the companys ongoing structures and processes.BENEFITS OF VBM* Benefits of VBM for ManagementBy moving from an autocratic to a more participatory, value-based mode, a companysleadership can spread around some of managements typical operational "headaches."* Benefits of VBM for employeesA workplace that operates according to the principles of Value-Based Managementempowers employees as workers and as owners. VBM creates a corporate culture wherework can be more satisfying and economically rewarding.
  • 7. * Benefits of VBM for Labor UnionsVBM involves the transformation of labor unions, offering labor representatives new andmore important roles than they have played within the adversarial wage system culture.Unions can help deliver a higher degree of economic justice and far greater rights for theirmembers than the "crumbs" now bargained for within the framework of traditional labor-management bargaining.* Benefits of VBM for the Company as a WholeExperience within a growing number of companies indicates that the more that peoples selfinterests are unified within a management system reflecting the principles of Value-BasedManagement, the greater customer and employee satisfaction will be. From this can flowincreased cost savings, increased sales, and increased profits.A BRIEF SURVEY OF LITERATUREIn the extensive literature survey it was found that the foreign research scholars havecontributed much on "VBM" than the Indian research scholars. The value systems werequite different for the different authors, different companies and different countries. Thefollowing articles are covered under the literature study:The Care of VBM systems (2003) by Harley E. Ryan, Louisiance State University aimed atfinding whether a firm significantly improves adjusted residual income after adopting valuebased management. He found that VBM improves economic performance; it highlightsinefficiencies and need for improvement in compensation contacts. VBM is more effective forhigh growth firm than for low growth firms. VBM encourages efficient use of the investedcapital. Firms with high net working capital improve economic performance after theyadopted VBM. Effective corporate governance includes use of monitoring and incentivemechanism to encourage the creation of shareholders value. VBM attempts to accomplishthe goal by providing manager with the set of decision making tools that identifyalternatives.* Word Whitt, Dept. of Industrial Engineering and Operation Research, ColumbiaUniversity, New York, in his article "The Impact of Increased Employee Retention onPerformance in Contact Center for Customer" found that VBM as regards to employees isvery important and contact center performance has often hampered by low employee jobsatisfaction as evidenced by high turnover of employees and giving them some value.* Department of Energy, Office of Project and Fixed Asset Management in Life Cycle AssetManagement (1997) viewed that "VBM is not just a good idea…. Its the law," whereasFrederick Taylor (1911) opines "In the past, man was first and in future, the system will bethe first."* Tad Leahy in Making their Mark(Business Finance) views "VBM, like any newtechnological initiative you put in place at your company, is like a loaded gun, so you needto be careful about how you put that gun in peoples hands," Newer companies have aneasier time with value-based management than older ones that have outdated, hard-to-remove legacies* In "Transformational Leadership: Peer Mentoring as a Value- Based Learning Process"-Mary Ann Mavrinac sees values as the foundation for organizational life. The connectionbetween individual wants and needs and public values are at the heart of transformational
  • 8. leadership. The Leader who can achieve congruence between individual and organizational needs in a change initiative is very likely to be successful. SECTION III VBM IN INDIAN CONTEXT Gita Piramal selected the top legendary business houses in India on the basis of following VBM criteria. * Not rags to riches, not because of their personal triumphs but for the impact their work and effort have on thousands of ordinary lives. * For producing products and services which are globally competitive. * Modern mind. Traders think of todays profit, an industrialist looks at tomorrows balance sheet but a legend thinks of the next generation. * Who go out of their way to encourage other entrepreneurs to start new businesses? * Pioneering spirit: dont take the easy road to prosperity but hack roads through jungles, build factories in villages, transform barren tracts of land into profitable assets, change mind-sets, pioneer industry or services. * Commitment to education. * Patriotic entrepreneurship/economic nationalism. During the earlier Raj they fought for the rights of Indian entrepreneurs to exist and vociferously criticized economic racism. Today they register Indian patents in USA etc. TABLE SHOWING THE VALUE SYSTEM IN INDIAN COMPANIESNAME OF THE FOUNDER PARAMETERSCOMPANY TATA GROUP J. R. D Tata Tata ethos-ideals and traditions Sound and straightforward business principles. Commitment towards the interests of the shareholders. Health and welfare of the employees. Generous towards people.RELIANCE GROUP Dhirubhai Huge production and best quality of output with cheapest price. Ambani Think big, think fast, think ahead. Introduced the equity cult to thousands of ordinary Indians. AMUL Verghese Kurien Professionalisation of farming. innovative process Use of qualitative equipment. Constructive social change in rural areas. Empowering the rural masses. Information and infrastructure. BIRLA GROUP G D Birla Commitment to untested values. Humanity and tolerance for the weaknesses of others. Taking risks. ZEE TV Subhash Fully committed to current concepts such as shareholder value, and value-based Chandra management (including out-sourcing, employee stock options etc.) Quality products at competitive prices.
  • 9. Challenged government vision of what people want from electronic entertainment. BOMBAY Cawasji Factory system with factory labor. SPINNING MILL Nanabhoy Davar Led the way for other entrepreneurs to enter industry. MITTAL STEEL L N Mittal Unique mix of cultures in the management team: takes best from each country. Open discussions -Asks everyone to tell top management what problems are and what should be the solutions. Then instills discipline that what has been decided must be done perfectly. INFOSYS N R Narayana Ethical business practices and transparency Murthy WORLD TEL Satyen (Sam) Access to telephone lines for ordinary people Gangaram Pitroda HINDUSTAN Prakash Tandon Professional management LEVER. Source: The Millennium Special; the Past the Present & the Future-Gita Piramal, rediff on net Today, value based management is very important and the aspects are ethics and transparency, innovativeness, quality and depth of management, financial performance, quality of product and services, global competitiveness and people practices & talent management. The bright example is the ranking made for the top 25 companies as shown below:- * INFOSYS Technologies has bagged the number one position and for the fourth time it is again in the row, a record of sorts (2001, 2003, 2004, and 2006). * The survey also reveals that reliance is rated on second on financial performance but has been pegged at 10th on ethics and transparency. Nevertheless, the fact that reliance did not slide down a lot further despite the Ambani family washing dirty hands in public is a testimony to the mystique of Ambani brand. Reliance is the only company that has featured in the top 10 of every most respected companys survey since 1983. * Another fascinating fact found was that, people tend to express respect for the Tata Group as a whole and not for any individual TATA company. I.e. only Tata. It was in second position in infrastructure sector. It has done well in ethics and transparency. * SBI the countrys biggest bank with nearly 14000 branches was in third position in banking sector due to use of technology and focusing more on medium sized business and advertising campaign. * Increasing competition and internal strife have turned AMUL slightly bitter but it remains a force to reckon with due to better quality of products.CURRE PRE COMPANY TOTAL INNOVAT QUALITY FINANCIA ETHICS QUALITY PEOPLE GLOBAL NT VIO SCORE IVE-NESS AND DEPTH L AND OF PRACTICES COMPETITIVERANK US OF PERFORM TRANSPAR PRODUCT AND TALENT -NESS RAN MANAGEME ANCE ENCY AND MANAGEMEN K NT SERVICES T 1 1 INFOSYS 18,124.2 2,230.2 2581.0 2778.2 2772.3 2315.7 2623.4 2823.4 TECHNOLOG Y 2 3 WIPRO 10,218.5 1,052.7 1,435.9 1551.4 1590.3 1235.5 1636.6 1716.1 3 2 RELIANCE 9,118.8 1,276.5 1,317.5 1969.6 1021.4 1007.4 1132.5 1393.9
  • 10. INDUSTRIES4 9 ICICI BANK 8,911.2 1,528.3 1,381.8 1211.6 1166.9 1200.5 1229.6 1192.55 13 TATA 8,474.5 822.8 1,232.0 1210.3 1445.7 976.6 1323.3 1463.8 CONSULTAN CY SERVICES6 5 MARURTI 7,690.9 1,012.1 1,069.6 1010.5 1047.2 1357.7 1061.2 1132.5 UDYOG7 21 ITC 7,154.2 938.5 1,167.3 1120.4 1004.4 943.4 1116.0 864.28 7 HDFC BANK 7,097.9 1,091.9 1,126.3 956.3 1076.4 1000.2 1029.5 817.69 12 TATA MOTORS 6,357.9 647.9 982.8 780.2 1202.3 997.5 848.2 899.010 14 LARSEN & 6,331.8 662.2 924.8 940.0 1027.5 926.4 937.4 913.6 TOURBRO11 23 NOKIA INDIA 6,286.2 1,213.4 700.1 605.6 675.3 1156.2 887.4 1048.012 26 BHARATI 5,969.4 1,064.6 872.3 902.7 690.0 880.1 822.8 737.0 AIRTEL13 17 OIL AND 5,952.3 687.1 944.9 996.6 836.6 694.3 799.2 993.2 NATURAL GAS CORPORATI ON14 8 JET AIRWAYS 5,860.9 978.2 797.1 532.1 689.0 1086.4 805.6 972.515 18 HERO HONDA 5,798.3 863.8 763.0 993.0 697.9 915.1 784.4 781.2 MOTORS16 15 TATA STEEL 5,751.9 499.2 846.9 765.0 1182.6 736.2 850.0 872.117 4 HINDUSTAN 4,863.1 629.0 780.0 621.3 716..3 707.8 811.1 597.6 LEVER18 11 GCMMF(AMU 4,659.2 967.7 625.0 450.1 721..9 923.4 527.0 444.1 L)19 10 RANBAXY 4,433.2 655.9 622.9 692.6 561.7 639.0 630.4 630.7 LABORATORI ES20 20 BAJAJ AUTO 4,309.2 689.1 629.2 725.7 551.3 675.9 474.9 563.221 24 CITI BANK 4,155.7 746.7 680.4 495.1 412.0 568.3 695.2 558.022 16 STATE BANK 3,939.8 451.7 578.9 699.8 703.7 478.7 494.2 532.8 OF INDIA23 6 DR. REDDYS 3,527.2 624.1 495.0 630.1 428.2 432.1 445.3 472.3 LABORATORI ES24 32 NEW DELHI 3,457.7 618.8 489.8 395.9 417.0 592.1 573.3 370.8 TELEVISION25 22 INDIAN OIL 3,431.0 426.0 497.1 574.1 489.7 491.8 480.0 472.3 CORPORATI ON Source: Business World , 5 June,2006 p.54 RANKS OF SELECTED COMPANIES IN INDIAS 100 MOST VALUABLE BRANDSRank Company Image and Brand Brand loyalty Brand Brand Overall mean perception awareness association performance 4 INFOSYS 3.897 3.463 3.120 3.183 9.776 23.438 8 TATA 3.732 3.630 3.252 3.382 8.998 22.993 14 ICICI 3.705 3.667 3.248 3.238 8.534 22.421 41 RELIANCE 3.179 3.793 2.969 2.668 6.723 19.332 50 SBI 2.863 3.687 3.064 3.196 6.122 18.931 72 LIC 2.660 3.533 3.279 2.633 5.412 17.518 97 AMUL 2.142 2.511 2.551 2.554 4.274 14.033 Source: 4ps Business & Marketing July 2006 * Infosys manages to snatch top slot in this ranking criterion. It stands for integrity, trust and excellent HR practices. Infosys is the company that is not just a back office of international companies, but the companies that can be trusted to provide customized solution that have international excellence. It has been rated as one of the most
  • 11. "innovative" companies in the world.* TATA brand represents a sense of nationalization, reliability, assurance and a true valuefor money. Today, the brand Tata can be termed as a brand that represents leadership withtrust. The heritage of Tata to return to the society that it earns has evoked trust amongstthe consumers, employees, shareholders and the community.* Reliance today, conveys a titanic empire emerging as a true blue multinational .In spite ofthe de-merger and the controversy in early 2006, when the two Ambani scions Anil andMukesh decided to go separate ways, the emergence of Reliance, with definite conviction,does reflect the parallel rise of the nascent Indian private sector from behind the shadow ofthe public sector enterprises.* SBI is today hailed as the big daddy of Indian banks as it touches the lives of people fromKashmir to kanya kumari and building the nation with the enormous welfare activities. Thebank has evolved today as a synonym of trust, reliability, and credibility. From a fuddy-duddy sluggish employee image to the image of being customer friendly, Indias largestbank SBI has come a long way providing various products and services. The investors areemotionally connected with the tagline of SBI "We have the power of SBI".STEEL AUTHORITY OF INDIA LIMITEDSAIL is the largest public sector steel industry with vision "To be a respected world-classcorporation and the leader in Indian steel business in quality, productivity, profitability andcustomer satisfaction" and with Credo that* Building lasting relationship with customer based on trust and mutual benefit* Uphold highest ethical standards in conduct of their business* Create and nurture a culture that supports flexibility, learning and is proactive to change* Chart a challenging career for employees with opportunities for advancement andrewards.* Value the opportunity and responsibility to make a meaningful difference in peopleslives.TATA GROUPThe TATA Iron and Steel Company were Indias first and the largest steel company in theprivate sector. Today, Tata steel ranks among the worlds top steel company and hasemerged one of the lowest producers of steel of world. The values and the work culturewere imbibed by the legendary J.R.D Tata who believed that whether in business or life, itwas people which matters the most. Tata steel values viz. "respect for the individual""credibility" and "excellence" are demonstrated in everything it does. TATA has madecommitment towards employee relations, environment, corporate governance andcommunity.AMUL CO-OPERATIVEThe Brand name AMUL from the Sanskrit word "Amoolya" meaning priceless, has reallybecome the symbol of many things; specifically "the taste of India". AMUL was establishedin 1971 and since then have achieved leadership position in dairy products and now the bigdaddy in market. This CIO International IT excellence Award has recognized the CooperativeMovement & its Leadership under the "Amul" brand, initiated by Dr. V Kurien, Milkman of
  • 12. India, whos main Motto is to build Indian Society economically & literally strong throughinnovative cooperative resourceful network, so as to provide quality service & products tothe end consumers and good returns to the farmer members.Amul embarked upon its illustrious journey as a beacon for the Indian cooperativemovement in 1946. Since then, it has been undergoing a multidimensional evolution whoseoverarching objective has been the same throughout: serving the farmer and catering toconsumer requirements. A structural landmark in this evolution process was the formationof the GCMMF in 1974. Throughout these last 31 years, we have demonstrated- again andagain-that Amul both represents and reconciles diverse expectations and aspirations.RELIANCE GROUP OF COMPANIES"Growth through Vision""Growth has no limit at Reliance. I keep revising my vision.Only when you can dream it, you can do it."Dhirubhai H. AmbaniFounder ChairmanReliance Group of CompaniesDhirubhai Ambani founded Reliance as a textile company and led its evolution as a globalleader in the materials and energy value chain businesses. He is credited to have broughtabout the equity cult in India in the late seventies and is regarded as an icon for enterprisein India. He epitomized the spirit dare to dream and learn to excel. In spite of the de-merger and the controversy in early 2006, when the two Ambani scions Anil and Mukeshdecided to go separate ways, the emergence of Reliance, with definite conviction, doesreflect the parallel rise of the nascent Indian private sector from behind the shadow of thepublic sector enterprisesMUKESH AMBANI GROUPReliance Industries Limited is the largest private sector business enterprise in India, on allmajor financial parameters, including sales, profits, net worth and assets.ANIL AMBANI GROUPThe Reliance – Anil Dhirubhai Ambani Group is among Indias top three private sectorbusiness houses on all major financial parameters. The interests of the Group range fromcommunications (Reliance Communications) and financial services (Reliance Capital Ltd), togeneration, transmission and distribution of power (Reliance Energy), infrastructure andentertainment.STATE BANK OF INDIAState Bank of India (SBI), the largest bank of India has been the lifeline of Indian BankingSystem. With the network of branches throughout the country, it strives to cater theexpectations of different stakeholders. With the provision of new and innovative financialproduct and diversified services, it has attuned itself to the changing needs of time.INFOSYS
  • 13. Indias face of IT: that is what Infosys has been to the world. It stands for excellent HRpractices. The only generic brand after the TATAs to have made a mark, Infosys is thecompany that is not just a back office of International companies, but the companies thatcan be trusted to provide customized solution that have international excellence. Infosysworks with a vision to be a globally respected corporation that provides best-of-breedbusiness solutions, leveraging technology and delivering by best-in-class people. It has amission to achieve the objectives in an environment of fairness, honesty and courtesytowards the clients, employees, vendors and society at large.Values drivers: C-LIFE* Customer Delight: A commitment to surpassing our customer expectations.* Leadership by Example: A commitment to set standards in business and transactionsand be an exemplar for the industry and own teams.* Integrity and Transparency: A commitment to be ethical, sincere and open indealings.* Fairness: A commitment to be objective and transaction-oriented, thereby earning trustand respect.* Excellence: A commitment to strive relentlessly, to constantly improve the workforce,services and products so as to become the best.LIFE INSURANCE CORPORATIONLIC offers insurance protection through its insurance services. It utilizes peoples money forpeoples welfare with a mission to ensure quality of life through financial security byproviding products and services of aspired attribution with competitive return and byrendering resources for economic development.FINDINGSFrom the table specifying the value based management in various companies, we are ableto have a brief knowledge about their strategies framed to satisfy their stakeholders.Software Company Infosys who bagged the first prize in value management this year givesimportance to the values of each party for the financial and social enhancement of thecompany. On the other hand, Tata Company which is largest company in Steel sector hasframed various programmes for each party for increasing the efficiency and satisfaction ofinterested parties. Reliance after its division between two brothers has not reduced thevalue management. In the same way other companies specified like State Bank of India,Life Insurance Corporation, SAIL have framed their values keeping in consideration theparties values and organizational values.But are the companies really rendering the responsibilities in true sense? No. We can provethis by specifying Tata companies fulfillment of national objectives on the condition that thecompetitions from other companies and international companies are minimized. Relianceentering into a scam in oil sector specifies that they are failing in standing to their ownvalues. State Bank of India Strike of employees for salary enhancement shows theirdissatisfaction on their own bank. Amul declaring an artificial scarcity of product brings anenvironment of distrust among the customers. By specifying the values in the website andannual report does not mean that the companies are really standing to the values ratherthey should practice it in an honest and fair way.SUGGESTIONS
  • 14. The Indian corporate houses should be conscious to give values to all the stakeholdersbasically the customers and community classes; and the value based management can bemade with the following four principles-* Commerce with morality* Business with responsibility* Management with humanity* Administration with principleCONCLUSIONValue Based Management is introducing a new era where values of company as well as thevarious parties interested are treated as an asset. Companies, whether private or public,profit making or non-profit-making, banking or trading, have to frame ethical and honestvalues which satisfy the needs of the vendors such as employees, customers, and otherstakeholders. For example: - Infosys Leader Mr. Nagawara Ramarao Narayana Murthy says"Im a capitalist in mind, a socialist at heart" and is awarded the first position in valuemanagement this year. In 21st century the winners in order to stand the global competitionalways plan to stick to the fundamental values, no matter what the situation. It is rightlysaid by Shiv Khera, Management Consultant,"Winners stand firm on values but compromise on petty things.Losers stand firm on petty things but compromise on values".Again when our value systems are not clear, getting what we want will be a bigger tragedy.The story of Midas says it all. Distorted values leads to tragedy like the king who had a lotof money but still wanted more of money for which he asked god to make every thing goldwhat he touches and thereafter he touches her daughter who turns gold. This means thatwe should have some value systems but that value system should be focusing on rightthings for right reason. Value Based Management in Indian context has grown not out of therealization of its tangible benefits but out of the compulsions at the marketplace. VBM inorder to be meaningful must be a way of life and philosophy because it is the eternalvigilance that pays the price of liberty.
  • 15. WELCOME TO INDIAN MANAGEMENT !This is a special site developed by the Centre for Organization Research and Development inManagement (CORD-M), Hyderabad, India. The members of CORD-M Under the Guidance of Prof.B. R. Virmani have been involved in research on various aspects of Indian management for over twodecades and would like to share some of their research findings as well as help various types oforganizations in developing and implementing some of management practices and preceptsspecially meant to address the issues and peculiarities of Indian organizations. Prof. B. R. Virmani isthe Chairman of Centre for Organisation Research and Development in Management. (CORD-M)and Formar Dean of Administrative Staff College of India (ASCI), Hyderabad, India.The management concept in the west developed as a result of evolutionary process,based on the changing values systems of the people - the social, political, and economicenvironment as well as educational and cultural milieu. However, in India, historicallywe never evolved our own concepts, keeping the Indian scenario in view. We found itconvenient to transfer management technology, trust as scientific technology. As aresult of these grafting process of management, we have created more confusion inmanagement thinking.However, suddenly due to success of the Japanese methods of management, even thewestern countries have started doubting their own concepts and are trying to emulatethe Japanese lessons. This has further confused the Indian managers as well as themanagement experts, who all along were following as a gospel truth whatever thewesterners had developed.Our Research finding in Indian Management indicate that many of the Managementpractices suggested by Foreign specially the Western consultants when implemented inIndian Organizations, get rejected by the environment resulting in contradiction withinthe Indian context between stated policies and actual practices termed as "Dualism" inIndian Management. Many of these practices remain on paper without properimplementation. Therefore, it becomes imperative to evolve our own concepts ofManagement, which are in tune with Indian environment and value systems. Based onextensive research we have evolved such concepts and Management practices whichare acceptable in Indian context.Challenges of Indian ManagementManagement in India is an amalgam of practices borrowed from the West-and morerecently from Japan-overlaid with age-old Indian values and norms that the still extant.This book is a seminal attempt to understand the nature of Indian Management andhow it can be institutionalized. With an in-depth historical perspective and a thoroughanalysis of four types of Indian organizations-traditional family-owned private sector;public sector, government departments and multinationals - the author highlight certaincommon styles, policies and practices that are in consonance with the Indianenvironment and also provides guidelines for management practices for Indianorganizations. The contradiction within the Indian context between stated policy anactual practice has been explored and brought to the fore. Also in this book: " Evolutionof management in India from ancient times to the present; " Evolution of managementpractices in the West and Japan; their strengths and weaknesses as also their relevance
  • 16. in the Indian context. " Overview of Indian Management and the future direction itcould take. Lucidly written and replete with detailed case studies based on datacollected from over 50 organizations the book provides the path Indian Managementneeds to take in the context of the changing competitive environment. It will beinvaluable for CEOs, managers, public policy administrators as also for consultants,teachers, researchers and students of management. The book is published by ResponseBooks Sage Publications, New Delhi (2007).