Column by Dr YRK Reddy - HRD Newsletter


There has been a history of jobs being traded amongst workers. So much so that a Union office bearer reportedly told a personnel officer who pleaded that there was no work available in the factory for the formers` friend - "Saab, hum nowkri pooccha, kaam nahi" ("Sir, I have asked for a job, not work"!).

Some would absent themselves so that others would earn over-time wage. Some contrive to get a job contracted out by going on sick leave. In the rural areas, some teachers and para-medical staff are known to appoint someone else in their place while they prosecute other vocations elsewhere in towns and cities. There have been reports of those who have got themselves discharged on medical grounds on selling the job to the next prospective. These instances reflect a notable impression in the minds of people that a job is, in fact, a property and to work in it is a matter of choice to keep the property adequately "maintained". It will take a while for this mind-set to change among workers despite the induced insecurity due to large-scale downsizing, sickness, closures, retrenchment and lay-offs in all sectors.

Fortunately, managerial jobs are too visible for such crude trading. But, do managers and officials suffer from the same mindset, even if their jobs cannot be traded? A senior official once remarked that he was gifted the police service by God, promotions by the rulebook and good postings by patrons in the system. Having acquired the position, he said, it is left to the individual to "use" the power and authority (or "misuse", if you wish to be puritanical) to the fullest advantage. He said, that using positional power is an art and it must be periodically practiced - like a knife, it gets rusted if you don't use and gets blunted or broken, if used too often!

In the days of kings and Nizams, people were assigned some positions with a tacit understanding that they can use them for purposes other than those explicitly required by the State. Thus, officials would derive benefits and give some part of it to the King as "Nazrana". Some of this went to the King, not to the exchequer. A respectable and eulogized episode is that of "Bhakth Ramdas" who used his position of Tehsildar to collect revenue but constructed a Temple instead - folklore chose to get God into the Nizam`s dreams and save him from the gallows! It is obvious that in those days of monarchy, positions acquired the characteristics of a property. And those who occupied them had to extract rents to the best of their ability for personal goals - selfish or altruist - as also for the King or the State.

The famous quote that "power corrupts and absolute power corrupts absolutely" was made mainly keeping in mind the misuse of "Positional Power". It was not an indictment of the power of a professional doctor over that of a patient nor that of the power of love, Bhakthi, knowledge or ethical conduct. Positional power tends to be misused because each position is essentially a "monopoly", as long as it lasts. There is no competition so long as someone is occupying it, though competitive conditions may be applied by making others aspire for it or by threats. The clever can collectively use their individual monopoly status to bring in a group-think of using the positional power to promote each others interests. Subordinates, suppliers, retailers would like to fuel this by appropriate reciprocation in the hope of getting a favour or at least, not to fall foul. This has been commented upon in literature and terms such as the "old boys club" and "cronyism" have arisen to depict the safe and yet unsound conduct of those misusing positional power.

Managers may want to control resources such as Jobs, Franchises, Purchase Orders, Consulting Assignments, Advertisements, Sponsorships and the like by limiting competition and the flow of information. They may wish to expand the zones of discretion as much as possible to give them the scope for using the position to their advantage. Such advantage may be only to help some one, promote professional interests and may not be corruption as such. Thus, in the decades of commodity scarcity, selection of distributors, retailers, transport contractors and suppliers, had been by nomination and vastly subjective criteria. Even now, managers tend to indulge in cronyism - promoting their reputational interests, if not material ones. These have a cost that is borne by the shareholders and not reckoned as part of employment. Most companies do not have a "disclosure" mechanism for their managers that can be certified and placed before the share-holders. Consequently, the CEO may permit such behaviours among managers to buy personal loyalty.

Using positions for results other than that for the corporation leads to organizational entropy and eventually, loss of shareholder value. If managers look upon their positions as property - even without being corrupt as such - companies will bleed with leakages, higher costs, idle assets and mounting risks. Obviously, shareholders lose value, as the attendant managerial omissions and commissions would have affected their residual income, adversely.

The phenomenon has been recognized at the macro level and debated for the possible loss of welfare to society. Anne Kreuger, who is currently a Deputy Managing Director at the International Monetary Fund, had coined the term "rent seeking" behaviours in 1974. The move to "roll back" governments through aggressive privatization in many countries can be associated with this recognition. The problem identified was that officials and politicians by their actions create competition among parties to derive an unfair concession/benefit. This action leads to people expending their resources for the special dispensations that eventually result in loss to society. A related phenomenon was discussed by the well-known economist, Jagdish Bhagwati in 1994 and termed as "Directly Unproductive Profit Seeking" which the economictionary recognizes. There are policy solutions to address this macro-problem. Is there a way at the corporate level?

May be, if all - repeat all - actions and communications arising from managerial positions are tightly recorded, as per a manual and have a close fit with strategy. The scope for discretions can be controlled with the prospect of a post-mortem by independent authorities such as the internal auditors - there will no space for the "art" of using the "knife". But there are two obstacles that need to be tackled in the process.

One is the tendency of perpetuate the scope for using the "art" by resisting all change. Everyone wants to buffet positions with discretionary powers and collective interests will demand a death to controls. For instance, politicians and bureaucrats thrive on the case-by-case approach and multi-stage controls to create competition for the service they will provide. If this situation has to be rectified, it becomes a virtual war against vested interests - a war no one wants to be engaged in India.

The second arises from is the very nature of managerial positions. Managerial positions are those, which require judgements that have no precedents to go by in some of the decisions. Such decisions also may have costly and complex implications. If judgment elements are not in the job, the principles of job worth will demand that it be construed as clerical or mechanical - best done by computers than human beings.

Notwithstanding this, the scope for the discretionary judgemental decision-making appears to be vastly reduced if:

  1. The structure is flat instead of a pyramid and there are self-managed and high performance teams instead of "cubby-holes' of individual slots. Ricardo Semler ("Maverick", Century, London, 1993) should tell us if this works. The future corporation (see Economist of 3-9th November 2001) any case ends up as a flat and networked construct, and
  2. There is better documentation of all predictable, tractable processes than now, so that judgmental areas are minimized and the reasoning becomes transparent. Documented manuals, especially with IT support, will ensure that transparency, equal opportunity and competition prevail and crowd out cronyism. The software industry appears to indicate this possibility.

But are the documents, manuals and IT control sufficient? Obviously, these are necessary but not sufficient as some can find ingenious ways of subverting the system. Managers will refrain from viewing their positions as property only when they realize that they are "trustees".

The great challenge, especially to the HR function, is to make each manager accept that he is a custodian and a trustee to the shareowner first and that he must do all that is possible to enhance the shareholder value or the EVA, as the case be. All actions must be justifiable from that perspective.

Managers must take a cue from the teachings of Gandhiji lest they are accused soon, by shareholders and the profession, of profligacy and self-dealing. Gandhiji approached the issue of property rights from a deeply philosophical perspective, which is a middle ground between Marxism and the Western capitalist. Trusteeship meant that the wealth eventually belongs to the society and each individual will have a common right to livelihood. Managers must be reminded constantly that the position one occupies is a trusteeship contract not a property on lease. May be we need to have display boards invoking an attitude of trusteeship in companies a la 5-S or Quality Policy.


January, 2002 Issue

Copyright 2000 Yaga Consulting Pvt. Ltd.