Why some systems work and some don’t

The idea for this post emerged from two recent incidents. Let me start by narrating those.

I was travelling with a senior colleague recently. He is a Canadian of Indian origin and has been back in India for about five years now. He had to collect a print out of his ticket at the airline counter. He politely stood in line and waited his turn and as expected, there was a white kurta clad politician type who tried to elbow his way in front of him. My colleague yelled. The kurta clad politician type stepped aside for a moment. Then as my colleague was about to give his PNR at the counter, our man tried again. The only thing which would prevent our offender from trying to break the line seemed to be a cattle prod.

 

Later on, I asked my colleague about the major challenges he had to cope with after returning. He said that he always finds it difficult to cope with how insensitive we Indians are about our fellow citizens.

 

The other incident again happened inside a plane. By the number of calls Indian fliers tend to make before they are officially allowed to use their mobile phones inside the plane makes me wonder whether India is a country of a billion CEOs or better, rescue professionals. There is no other way people need to make so many life and death calls (or check life and death mails on their blackberries) while the stewardess is crying herself hoarse requesting passengers not to use their phones.

 

Anyway, there was this gaudily dressed businessman type who started yelling into his phone even while the plane was decelerating on the runway. Of course, he was talking to his driver. While the conversation was in Hindi, it may be paraphrased in English as follows: “No, don’t you park the car in the designated parking space, you moron! Just plonk it right at the passenger exit. You will see a big “No Parking” sign. There is usually free space below it. Just park it there and wait!”

 

Which brings us back to the billion dollar question: Why are we the way we are? Why are the British so good at forming queues and why are we so lousy? Why do we break established systems with such impunity? The most quoted answer of course is “We are like that only!” More serious analyses also exist aplenty.

 

To my mind, any system exists for two broad purposes. First, to ensure “order and predictability” in the way a certain activity is performed. To ensure this order and predictability, the system relies on time tested principles such as fairness, equality, concern for fellow beings and non-violence. Most Indians would wax eloquent about how our “rich and ancient cultural heritage” identified and implemented these exalted principles (It’s written in our scriptures, I tell you!) before those western barbarians came down from the trees.

 

The second purpose of a system is to penalize those who err. Even in this, order and predictability is necessary. The punishment should be proportional and assured. To be fair, I have noticed that the Bangalore Police has implemented a certain amount of “predictability” in the way they check for drunken driving. They simply put their pickets at the same place for months on end. As a result, drunken drivers are able to accurately “predict” the check points and simply drive around them.

 

While it is not too difficult to design a system based on the above aspects, whether a system works or not, to my mind, depends on how much trust the system can generate. If people do not trust the system, they will not follow it. I think that this lack of trust in the system is at the core of why we Indians are the way we are.

First, systems are designed in such a way that gives the impression that they are meant to be broken. Let me give some examples:

• There was this narrow flyover near my house where there was a sign that indicated the speed limit to be 30 km per hour. Made perfect sense, given that the flyover was narrow and clogged. Then the flyover was widened to six lanes! But the speed limit still remains 30 km / hour! Only cattle carts can now follow the speed limit

• There is this property tax payment center with eight different tables for eight different regions. None of the tables are marked. And there is a sixteen page form to be filled before approaching the table. The only option left for most sane people is to bribe a junior official to fill the form and direct to the right table!

When the “system design” is so ridiculous, most of us feel no qualms about breaking them.

 

Second, system implementation is a disaster. System implementation has two aspects. One is external and enforced implementation, such as by the police. Will I get caught if I break the traffic signal? In most cases, no. Because the policeman will be having a cup of tea by the road side. Even if caught, I can get away with a small bribe.

 

The other is implementation by the members of the system internally. If I stand in line and wait patiently for my turn, will the guy behind me do the same? If you are in an Indian line, then no. So if I choose to stand in line and wait patiently, I am the prize fool and my stupidity should be rightly exploited by the clever ones behind me. Result: I too break the line so that I can get my work done.

 

It’s all a game, as Prof. Raghunathan puts it so well in his game theory based analyses of Indian public behavior in his book: Games Indians Play.

 

I don’t know whether the “Indian system” will ever change. I am not even going to pretend that I care. I employ most of my efforts and resources trying to “insulate” myself from this system and live in my own little comfortable cocoon.

 

But there are important lessons to be noted as far as systems and processes go within a business firm. At the core of the success of a system lies trust. This trust is built only when the management is seen to follow the system as rigorously as it expects the employees to. For example, employees will rarely take performance evaluation deadlines seriously if the management does not stick to promotion or increment announcement deadlines. Employees can be scarcely expected to fill their time and expense reports on time if there is no certainty on when reimbursements would actually be made.

 

Not a great insight, but systems work only when they are well designed, assiduously implemented and glorified through example. To my kind, the last one is most critical in a business environment.

The purpose of consultants (and consequent pitfalls)

I went to business school after just six months of graduating from engineering school. I spent those six months as one of the thousands of faceless “software engineers” in India, writing pretty low-end code. After two years in business school, I joined the “consulting” industry. There was a brief period when the term “consultant” sounded mighty glamourous and I walked around with a swagger, looking down (figuratively, I am too short to do it literally) over the lesser mortals joining FMCG, general management or worse, HR. I was lucky to be from a campus without the plum US I-banking jobs (it was before 2008, you see), because they are the “true Brahmins” and would have looked down on us lowly salaried advisors without “bonus components!”

The first assault on my swagger came from none other than my own father. It was our convocation dinner and parents were invited. My father was approaching retirement then, after more than thirty years of building science museums for the Government of India. The futility of trying to create Nehru’s “modern Indian” by infusing scientific rationality among a population safely cocooned in elaborate superstitions and religious opiates never seemed to hit him. What on earth he would know about the glamourous “private sector” and ultra-glamourous “consulting,” I wondered. I was therefore rather miffed when he and another parent seemed to find the concept of a 24-year old without any experience becoming a consultant rather hilarious.

The second assault came from that painful thing called “reality.” It took just a few months of mind numbing excel sheets, PowerPoint slides and inedible airline meals to replace the swagger with a hunch. Existential musings about the purpose of life, universe and everything was replaced with the more specific question around why “consultants exist,” or rather, why do clients, who are perfectly capable themselves, hire consultants (especially those kids in their twenties with a couple of decades’ less experience than the average in-house middle manager?)

In my limited experience, I have come across the following reasons as to why clients hire consultants:

• To fill a genuine capability gap: Occasionally, consultants are called in to fill a genuine capability gap in the client’s organization. Typically, the client is faced with an important challenge which she is unable to solve internally and realizes that she needs the “specialist skills” of a consultant. Being called in for this reason is a major ego boost for most consultants. In fact, I know a number of consultants who believe that this is the only reason why clients call in consultants (which is rather self-delusional, but consultants are human too right?)
• As a stop gap measure: This is similar to the above in as much that the client perceives a genuine capability gap in her organization which needs to be filled by outsiders. But her strategy is to bring in consultants to develop internal capability. Such engagements are ironic, as the consultant is charged with training client resources to deliver his own redundancy (and occasionally proving it too!)
• To augment bandwidth: Basically glorified “body shopping.” The client often faces the need for relatively high quality people within short notice but does not see the justification of creating the expertise permanently in-house. So she literally outsources to consultants. This comes with the added advantage that the “consultants” can be driven far more than employees since the consultants have to justify their “premium.”
• For validation: Ever so often, the client will need “external validation and benchmarking” of her own ideas and strategies by “reputed external consultants.” Put bluntly, she needs a rubber stamp, albeit a high quality branded rubber stamp. The basic assumption here is that the reputed external consultant will be unbiased by the prospects of future work from the same client and deliver a neutral verdict. The validity of this assumption is anybody’s guess, but this reason tickles the consultant’s ego too, often as much as the first reason

Now, if these are the reasons, what must a consultant offer to fit the bill? To my mind, there are two clear propositions:

• Differentiated high-quality people: This is fundamental to all the four reasons mentioned above. The consultant must be able to deliver, and visibly appear to deliver, better capabilities and results than the client’s own employees. This is critical to justify the consulting premium. Moreover, there is nothing worse than the client’s employees feeling that they could have done as good a job at a fraction of the cost for the prospects of repeat work of the consulting firm. This fact is a major ego boost for consultants and often forms an integral part of their identities (there is no better delusion than the illusion of self-grandeur!)
• Differentiated Intellectual Property: The consulting firm must have differentiated intellectual property which cannot be procured from the market. It is fundamental to demonstrate the results from this differentiated intellectual property to the client. Or else, he will simply try to recruit the “high-quality” people (even if it costs a bit more than regular employees) and save on the consulting premium.

Both of these factors add up to the consulting firm’s brand. At the end of the day, it is the monetization of this brand that determines the consulting firm’s bottom-line.

And herein lies one of the most obvious (though often unacknowledged) pitfalls of the consulting industry. The “people” (rather their billable hours) are what drives the consulting firm’s P&L. The IP is a part of the balance sheet. As is often the case in all businesses, disproportionate focus on the P&L leads to neglect of the balance sheet. It takes time, effort (and an appetite for risk) to dedicate resources to develop IP. It implies sacrifice of “billable hours” and a hit on the bottom-line. No wonder then that many consulting firms focus on maximizing the billable hours of their people rather than building differentiated IP.

The unfortunate result is that very soon, clients see just the “people” and fail to perceive what value the “firm” adds. This leads to questions regarding the “consulting premium” which can have three results, none of which are positive from the consulting firm’s perspective:

• The client tries to directly hire the consulting firm’s people, or people of similar profiles
• The client gravitates towards the consultant with the “lowest cost” per man-hour
• The client terminates the consultant and replaces with her own “internal team

Result: this converts a high end consulting firm into a glorified “body shop.”