Monday, March 17, 2008

Food business

Speaking of eating joints, when we were at this place, I actually felt that this was a good business. Any ways margins are way high in the restaurant business, add some novelty like a Rajwadu style village setting or a maachan and people will pay the premium.
My friend pointed out that it wasn't a very easy business to do however. His reasoning was, that you need to be present all the time else you wouldn't know where your ingredients disappeared. Cooking isn't exactly an activity where you measure with a weighing scale how much atta you used in a paratha (though I know of pizza places which do that, weight the dough, weigh the cheese etc, atleast Dominos does). How do you track a few Kgs of atta going here and there, vegetables disappearing. Unless you source the food items yourself, you might get hit on the prices (assuming you have people who are not exactly honest working for you) Or how do you track spoilage ?
Today I was sitting at this food joint waiting for my order, when I overheard the conversation that the manager of the joint was having with his employee. The place had apparently made a loss of some 35-40k and he was trying to check the accounts. Finally it came down to staff eating food for free. The employee showed the register where the staff makes entry when they eat. The manager scans it and says, "this itself will account for more than half of your loss" (actually said in Hindi, but will post translated versions here)
Then he starts looking at individual items and names of the staff and suddenly exclaims "where is my name in this, even I had eaten, why is my name not here"
The employee showed him his name saying "Ya it is there, see here" to which the manager replies "Double omlett against my name, I don't even eat eggs, get me a pen let me scratch this out, I am a pundit, eggs against my name doesn't look good" simultaneously scratching out his name. Then he goes on to scan the rest of the ledger
"Omlett so many times ? I don't remember having eaten here so many times, what is the date here, 24th and 29th, that time I had still not started eating eggs, I am a pundit" scratch- scratch
And he goes on... Finally exasperated he says "Listen, I am your manager, you don't put my name here, I will make life tough for you" while laughing.
Saying this he says, "see this is the reason for the loss, from tomorrow onwards staff won't eat at this outlet, if they eat they will have to pay. I will talk to the boss and get this system in place" and then tossing aside the register, he asks the guy whats there in the kitchen, "get me dinner, I have to eat here else who will do your accounts for you. Understand else I will stop coming here and you can show your accounts to the big boss himself. Now is there paratha? rice? get me some dal along with it" And off he ate happily.
Its true, with motivated employees like these, it is definitely a difficult business to do :)

Money Money everywhere

Ever since I took the LEM course with professor Handa, I am always on a look out for some business / venture which might interest me. The more I observe the more convinced I am there there is money to be made everywhere. You don't necessarily need a splendid idea that no one had thought of before. Find what people want and give it to them and they will pay. Let me give you a few examples

1. The chai and maska bun seller at gujarat university road.

One evening while on a stroll we went to this fellow. He sells just 2 things. Tea and maska bun. ( Ok he sells coffee as well, but thats besides the point) Now lets do a simple estimation based on what we observed in the 15 mins we were there. The charges are Rs 10 for a maska bun. A plain bun costs Rs 2.50, even assuming he justs puts 10 buns from a 100gm butter pack which costs Rs 15, butter costs Rs 1.50 thus total raw material cost = Rs 4. So assuming he is an entrepreneur and so he doesn't charge himself for his labour. Thus he gets a contribution of Rs 6 for each maska bun he sells. In the 15 mins we were there he sold atleast 25-30 buns ( yeah he is famous ) So lets assume he sells say a meger of 150 buns in a day ( though I think he sells much more, lets be conservative) So he makes Rs 900 a day. He has two helpers. Now labour who does work for civil and construction is paid between Rs 40-Rs 60 a day. Lets assume he pays these helpers Rs 100 a day. Even then he makes Rs 700 a day and in a month he makes
Rs 21,000 and all of it tax-free !!! Surprised ???
Where are all the software engineers ?? We think we make money :P

2. Visa-counselling service

When we were to go to Germany on student exchange, we were going to stay for 4 months and hence we couldn't go on a schangen visa, we had to apply for a long term student visa / residence permit. Now we had guidance from our seniors who told us to apply for a 90 day student visa and then convert it to a residence permit after reaching Germany. Thats what we did. Now some other friends of ours from another management institute decided it was probably better to go to a visa agency. The agency asked them their duration of stay and based on that asked them to directly apply for a residence permit. Nothing wrong so far, however the problem is that the consulate asked them to show as financial proof, a DD drawn on a German bank to the effect of EUR 7000 ( our total 3 month expense was less than EUR 3000) and so none of them ended up going on exchange. EUR 7000 is a lot of money to show even if you will not use all of it. All this when they paid the visa agency probably a 1000 bucks.
This got me thinking. This is actually a good business. All you need to do is, go to the websites of all the consulates and download forms, requirements for the different visa types etc. Now-a-days almost all consulate websites are self sufficient. Once you have this dossier ready, you are in business. Any time someone comes, find the safest option, photocopy the relevant info from the dossier, hand it to them and take you fees. NO visa agency will give guarantee and no one will expect them to either.

There are so many other seemingly "unglamorous" businesses which nevertheless make money !!

Reflections on the past two years at IIMA

Sometime back, a freind had asked me how we (IIMA people) solve a case. What is it that we do differently when we solve a case and when I thought about it, my honest answer was nothing different. We still do the same things, we look at the data, we analyse it, and give our recommendations.
So what is different about an MBA from IIMA?
Now that I have spent 2 years here and am on the verge of graduation, I was stumped by this question and spent some time reflecting on the two years here and how it has changed me. Well in my opinion, the biggest value add that I received from the two years here was more personal than academic. (yes all the assignments and cases and discussions did help me think in a more structured manner)
The rigorous first year is the key I'ed say. When I came here, I had no idea that I was capable of working so hard. Sleep at 2 am and be ready for class at 9am day after day. Nightouts, read 100-200 pages daily. Be prepared with the basics and the class starts assuming you know the basics. Plus couple this with being part of campus activities. When I look back, though the second year has made me a bit lazy, but if it really came to it, I can do it again and it won't scare me.
The two years here have really seen me stretch myself to the limits, and I am much more confident of my abilities than I was before I came here. Learning to manage your time well, so that you can also make time for some other things you like and not get caught up finishing your academic work, increased stress resistance and even higher failure tolerance. Outside of IIMA each one of us was probably amongst the top in our respective colleges, once you come here, you realise that there are others far better than you. First there is denial, then you taste failure, then you decide that its time to work harder and you improve on your past performance. It its things like these that have been the most value add to me, not the thousands of cases we did, yes they did matter, they did help in broadening our outlook, but in my opinion I value the personal growth more.

Friday, March 7, 2008

Command and Control, Why Not?

“Command and Control,” Why Not!

There is a school of thought that suggests that we should continue with the authoritarian, Command and Control model of leadership for no reason other than there is no alternative.

How can we control an organisations production or service if we are not allowed to specify the parameters within which it works?
After all, we have to tell people what to do or they would never do anything, would they?

We are aware of the flaws inherent in this system of management, strikes, low moral, destructive behaviour, but in the absence of any other way to manage we persevere, flogging this same old dead horse.

But there is a model for non authoritarian leadership, and although the model predates the book it is thoroughly explained in Douglas McGregors work "The Human Side of Enterprise."
Written in 1962.In this book Douglas defines the authoritarian Command and Control model as Theory X management and the non authoritarian model as Theory Y.

In the Theory X model management assume that the workforce are lazy and ignorant, the job of the Theory X manager is therefore to make it so difficult for the workforce not to work that they are forced to do what the manager wants.
The Theory Y manager on the other hand believes that his workforce is intelligent, articulate and imaginative, and above all that they want to do a good job.
The job of the Theory Y manager, instead of telling his workforce what to do, is to create the environment in which they can do their best.

The only way that this can be achieved is by knowing what the workforce actually need in order to do their best, and the only way a manager can do that is to listen to what they want.

Ooops, that is going to be a problem, how can we really listen to what our employees want when we have hundreds or possibly thousands of workers who all need to be heard.

But that is the clue, listening is not a "need" (As defined in Maslows Hierarchy of needs) for the manager.

The manager cannot see any benefit to him or herself that would come from listening to the workforce.
“They have not been to college, I have, why should I listen to them?”
So managers never make much of an effort to listen because they do not feel the need to.

Being heard however is a "need" for the workforce. Being heard gives the workforce the respect that they "need".
It allows them to become engaged and take pride in what they do.
If listening is not a "need" for managers then we have to look for another way for the workforce to be heard, something mechanistic that will not fail because management don't need to do it and therefore will not support it.
Such a system is built and is maintained by the workforce.
It is simple and repeatable; it satisfies their need to be heard without having to rely on management who don’t see why they should listen.It produces practical process improvements whose value can be measured and it makes the workforce feel good about what they do.
Over time management see the measured performance improvements that result from the workforce being heard and then even they start to support the system by asking how they can help.

That last sentence is very important.

In the Nineteen Fifties, Nye Bevan suggested that management for the fledgling National Health Service in the UK should have an “Inverted Pyramid” structure.
He suggested that instead of management being at the top, supported by the rest of the pyramid, the Pyramid should be inverted with management at the bottom supporting the rest of the workforce in their delivery of care to their patients.
This was such a powerful image that few disagreed and the “Inverted Pyramid” model of management became one of the staples of the MBA syllabus.Unfortunately few have ever been able to bring the academic model to life and our management structure remains solidly pyramidal, (Managers at the top and everyone else underneath), despite the consensus with Bevan that it should be the other way up.
Using the workforce maintained system to allow their voices to be heard initially appears to exclude management, this is deliberate and avoids the damage that can be caused by management who lack the “need” to listen and therefore do not.
When the workforce however are being heard and the consequent performance improvement is evident, managers return to the workforce operated system and ask how they can help to support it because they too want to be a part of the improvement.
From being top down driven traditional “Command and Control” managers they have become, in a very short time, Inverted Pyramid Managers who instead of telling the workforce what to do, are asking what they can do to help.

They have developed a “need” to listen to their workforce.

That is a big deal.

Peter A Hunter
Author “Breaking the Mould”
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