Shaping Institutions: Breaking barriers and focus on stakeholders

Breaking barriers and stakeholder orientation have a significant impact on institution building. But what do they mean in practical terms?
For representational purposes (Express Illustration/Tapas Ranjan)
For representational purposes (Express Illustration/Tapas Ranjan)

In four articles so far about ‘Shaping Institutions’, we outlined Bhavan’s SPJIMR research findings on the mindset, behaviour and actions that institutional shapers adopt. This month’s focus concerns two mindsets, not covered in earlier articles: (i) breaking barriers and (ii) stakeholder orientation. These two dimensions emanate from similar values of autonomy, mastery and purpose, as propounded by Daniel Pink, and act as the motivation for performance.

The dimensions have a significant impact on institution building through the integration of people, policies, processes and performance. What do they mean in practical terms? Breaking barriers: Any transformation effort faces obstacles and barriers. The shaper seeks pearls of possibilities in an ocean of uncertainties, which are usually unseen and which open opportunities.

Seeing the big picture and trusting one’s instincts to break those barriers requires a high impact and convergent set of actions. Once those rocks of resistance are broken, the barrage of change serves as a catalyst to create life-altering conditions. From the six companies we studied, here are some examples.
Hasmukhbhai Parekh registered HDFC as a housing mortgage company when he was already 66. It was the first Indian institution for housing finance.

If executed well, it was a chance for social change. Dr Manmohan Singh, then the Finance Secretary, doubted whether the idea would click. Hasmukhbhai remained enthusiastic about providing loans to the middle class to build their dream homes and even persuaded his nephew Deepak Parekh to join this venture. Today HDFC is the largest and most admired name amongst the financial institutions of India.

For young 23-year-old Uday Kotak, there was always the safety of the family business to return to. Uday threw himself into the bill discounting business and got his first business with zero capital invested. One also needs to guard against legal or societal implications of breaking barriers. Bill discounting was eventually prohibited by regulators due to misuse in accommodation by other operators. About 60% of Kotak’s business vanished, so he went into equipment leasing and capital markets. Kotak focused on increasing value and not volume.

Growth must add economic value. It was action from a renewed mindset that helped Kotak transform from being a small bank to among India’s most valuable ones. At Biocon, Kiran Mazumdar-Shaw had to break many social barriers about gender. Job applicants were hesitant to join her as they perceived a lack of job security working for a woman. Lending institutions did not have faith in a women entrepreneur investing in technology; it was unheard of in those days.

Due to her strong sense of purpose, she overcame many barriers. Biocon became an admired biotech company globally. While most Indian pharma companies concentrated on generics, Kiran remained focused on more risky business. She was the first to start research services on biosimilars through Syngene. Breaking barriers requires the energy of purpose, confidence, risk-taking abilities and risk mitigation to escape the gravitational forces of habitual thinking.

Stakeholder orientation: The values and interests of various stakeholders in organisations, for example employees, customers, shareholders, communities, suppliers, etc., are often in conflict with each other and need to be balanced, harmonised, integrated and aligned. Stakeholders are living, breathing human beings waiting for the human connection.

Stakeholder orientation is cultural and behavioral insofar as organisational members need to be continuously aware of and proactively act on a variety of stakeholder issues. Institution builders concurrently create value for all. As per the Stakeholder Theory propounded by Edward Freeman in 1984, creating value requires challenge, critique and creative imagination to handle potential conflicts. Such an orientation requires a deep and abiding focus on the purpose, not just profits.

This helps institutions to operate in a pragmatic, sustainable, responsible and ethical way. Examples again. TCS stands out for its prominence in all respects. The Tata Business Excellence Model was driven to deliver strategic direction and drive business improvements that have connected the company with its suppliers, customers and partners.

The company slogan, Experience Certainty, involved all stakeholders through commitments to deliver credible results. Biocon’s purpose of accessible innovation for affordable healthcare has its focus on billions of patients rather than billions of dollars. Biocon partnered with Mylan and other international pharma players to better place the company’s drugs in global markets. Biocon’s efforts for improving community health sharply aligned with stakeholder interest.

Employees develop positive learning abilities, knowing that their employer is satisfying all stakeholders. Global hiring was undertaken to build requisite capabilities. At Marico, contributing to the good of society is important. Neither the company nor its stakeholders pollute the environment. Marico’s coconut collection centres provide cultivation-related information to the farmers. Outreach programmes focusing on scientific farming practices help raise farmer incomes.

Additionally, Marico’s Corporate Social Responsibility (CSR) contribution is based on mentoring and facilitating entrepreneurs to scale their venture for the benefit of society through the Marico Innovation Foundation. The descriptions of these two mindsets and actions, along with corporate examples, illustrate how organisations create a new narrative for institution building.

(During his 50-year career, Gopalakrishnan had served as Director, Tata Sons and, before that, as Vice Chairman, Hindustan Unilever. Together, the authors have written the book How Kiran Mazumdar-Shaw fermented Biocon)

R Gopalakrishnan
Author, Distinguished Professor at IIT Kharagpur & Corporate Advisor

Sushmita Srivastava
Associate Professor, People & Performance, SPJIMR, Mumbai


Related Stories

No stories found.

The New Indian Express