Managing in an Era of High Growth
Volume 18, Number 4 Article by B Mahadevan December, 2006
Managing in an Era of High Growth :
It appears that by registering a GDP growth rate in excess of 8%, India has stepped into an era of economic super growth. Many economists and consultants have been making such predictions for a few years now. The index of industrial production shows healthy growth and it is likely that the trend will continue in the years to come. While economists are busy analyzing the buoyancy, interest rate, credit, inflation and other such macro-economic variables and policy implications, we need to understand firm-level issues pertaining to growth during the growth phases of an economy.
In an era of high growth three deficient areas get exposed in an organisation: inadequate management bandwidth, inability to add capacity to meet the growing demand and difficulty in preserving the culture of excellence through innovation. It is important that the top management focus on these issues while managing growth.
The pace of growth can be hastened by acquiring new clients, and in the present era many of them would be from outside the country from different cultural and linguistic settings. Capitalising on these growth opportunities calls for managerial talent with global orientation, well versed in cross-cultural traits and good in communicating with the new trading partners. Many firms suddenly find that the rate at which these resources are demanded is far more than the rate at which the resources can be gathered and made available.
The second issue is one of capacity augmentation. Many organisations are simply not prepared to grow the capacity of physical facilities at the rate of 50–70% on a yearly basis. Organising funds for such large capital outlays, administering the funds towards capacity build up, achieving inorganic growth by acquiring other companies and augmenting management control systems and human resources to manage the ongoing growth processes together form too steep a trajectory to tackle.
Senior managers get overly pre-occupied with expanding markets and grabbing market share at the expense of organisational excellence. Due to unfolding demand and mounting resource crunches, training and skill upgradation might be postponed and in some cases compromised. Furthermore, in an era of high growth, markets tend to tolerate mediocrity. Therefore, organisations are less incentivised to invest in innovation and excellence.
Many Indian firms are likely to face these challenges in the coming decade. Business leaders must recognise the fact that growth has the tendency to camouflage inefficiencies in an organisation. By preparing the organisation to face up to these facts and making better investment in resources and capacity, firms can stay on course and reap the benefits accruing from a high growth economy. Otherwise, the global market equilibrium will shift the competitive advantage elsewhere in the future. The critical management challenge is to postpone this inevitable phenomenon indefinitely.
High growth must go hand in hand with better systems and methods of dealing with policy and regulatory issues. Therefore, governments must also invest in new systems and technologies that are capable of scaling up to the required growth. Our Round Table feature this time addresses this issue and provides multi-dimensional views on the theme of E -Governance. The two companion papers address some of the conceptual and implementation issues of interest to practice. In our Interview feature we have focused our attention on corporate transformation happening in the pubic sector organisations. In this issue, Mr Ashok Sinha of Bharat Petroleum Corporation Limited shares some of the issues that led BPCL to gain market share and improve through innovative practices. As in the past, the current issue brings to readers a set of interesting research papers and the award winning student essay. I hope you will find these interesting and useful.
We have made some changes in the Editorial Advisory Board of IMR. On behalf of the IMR team, I thank the outgoing members for their significant contributions. I also welcome the new members and look forward to benefiting from their expertise in taking IMR to greater levels of rigour.
Before I wind up, let me have the pleasure of wishing you all a very happy and prosperous 2007! We at IMR look forward to yet another year of all round progress and prosperity in various sectors of our society.
Reprint No