Business community is hopeful of on-ground movement in growth terms
Shashank Jain November 21, 2014
The Indian economy is at an interesting junction, a crossover point of sorts. After a long run of muted growth, pessimism, and repeated beating of Brand India, businesses are looking optimistic, there is a feeling of self-belief, euphoria, and business plans are being revised upwards across the board. The positivity around our sound demographics, consumer-led domestic growth story and entrepreneurial spirit (all of these always existed, though) had never resonated so strongly with us in the recent past. While the growth engines are being revved up, the business community is hopeful of an on-ground movement as well, very soon.
In the midst of all these, we have small and medium enterprises - with sky-high aspirations - waiting to make a mark on the economy. Some of these emerging companies will be tomorrow's bellwethers in their respective sectors and industries.
The growth curves may have become steeper and shorter, but the nuances of growing up haven't changed. It's an enormous challenge for an emerging company to juggle and balance all the levers - maintaining top-line growth, consistently delivering customer satisfaction, managing competition, having a healthy work environment for employees, improving governance standards, risk and compliance framework, choosing the right business partners, contributing to the society, sustainability - the list is endless, and so are the associated challenges.
In the zeal to grow faster, emerging companies, at times, are tempted to falter and compromise on ethics, principles and compliance. This can lead to faster growth, but not necessarily longer. While the focus initially is, and rightly so, on revenues, customers, markets, competition, etc., it needs to be done in the right and a structured way. We have seen systems and processes falling behind and the companies are unable to improvise these to support the growth. This invariably leads to chaos, which in some ways, compromises customer as well as employee satisfaction, ultimately stifling the growth of an organisation.
For emerging companies, one of the most critical factors to become a large successful corporation of tomorrow is separating ownership from management at an appropriate stage. This, undoubtedly, is also the most difficult aspect. While there is no specific time for such transition, the entrepreneur himself is the best person to sense this. And the ability to sense this makes that difference. 'Let go' is, perhaps, a not-so-admired phrase, but is a powerful one. The promoters need to realise the importance of creating a successful and independent professional management team to run an organisation. While creating shareholder value is an important KRA, it should, at some stage, be passed on to the professional managers and not retained by the shareholders themselves. This makes the organisation independent and one with a sound decision-making process, bereft of any emotions.
Another key aspect is the constant struggle to choose between top line and bottom line accretion. First, it is never a linear growth and second, these two may not have the same growth curve, especially in an emerging company. There would be phases of growth and that of investment, one followed by the other. It is the discipline of making sure that an entrepreneur focuses on both that would help an emerging company succeed in the long run.
Emerging companies are perennially in need for capital. While there are different types of capital available - bank finance, institutional debt, private equity, etc. - its availability largely depends on the companies and the entrepreneurs' track record, and willingness (not always necessarily the ability of the business) to honour the associated commitments.
While companies create value for their shareholders, they do so with a constructive partnership with the society and the environment. For the partnership to be meaningful and sustainable, emerging companies should not lose sight of these co-creators of value. They need to ensure that their business plans include contributing to societal needs and environmental balance. In the zest to grow today, tomorrow's bellwethers should not forget that they need to create an enabling environment for tomorrow's emerging companies.
The author is Executive Director of PricewaterhouseCoopers (PwC) India