Building Organisational Capabilities for Sustenance and Growth

History The Teacher

History talks of many an empire. What could be common to all the empires of the past?

The Mauryas, Guptas, Mughals, Romans, Persians, Ottoman, Hans, Spanish and the British, each one a powerful regime, held sway over vast swathes of land and had subjects across geographical boundaries we now recognise. Geographically and chronologically spaced well apart, each one tremendously influenced populace it ruled upon and made lasting contributions to virtually every aspect of contemporary culture.

Each came into existence and grew but couldn’t succeed in sustaining themselves to grow into perpetuity. Despite unquestionable powers, and repressive enforcement systems, perpetuity eluded each one of them. Having failed to sustain and grow beyond a time, they now remain confined to pages of history; their significance waxing and waning, at the mercy of contemporary political regimes in their attempt to attain perpetuity.

History is a great teacher. Those who do not learn from history are condemned to repeat it.

Study history and take a close look at current geopolitics and experience a sense of déjà vu.

Sustenance and Growth – An Entwined Pair

Sustenance is about finding fodder for existence whereas growth is an organic characteristic that enhances relevance of an entity to its surroundings. Growth is comparison, of an entity to itself or others plotted on a timeline. Thus, growth of an individual could be of about chronological age, biological and intellectual attributes, capacity to fend for oneself or contributions to the society.

For business entities, sustenance is about footing the bill of operations without going down under; whereas growth is multi-dimensional expansion, in areas of activity or structural architecture. Sustenance of business depends on its ability to generate return on investments. Growth depends on the share of ROI employed to extend the envelope of relevance and influence. Sustenance-growth combination dictates sustainability.

Though inseparably entwined, sustenance and growth have independent attributes. Continued sustenance results in growth. Growth demands new dimensions of sustenance. Demands of sustenance denied, entity dies. Bare sustenance stunts growth and stunted growth kills. Good sustenance nurtures growth.

Essentially organisational existence is an ever-demanding ever-expanding, never-ending cycle of sustenance and growth that can extend to perpetuity.

Perpetuity

Craving for perpetuity is hardwired into every species.

In the case of animals, limitations of perpetuity imposed by physiology is overcome by bloodlines called family. The evolved, ensure perpetuity through ideologies or lasting contributions to society.

Organisations, being nonbiological entities, differ. Organisations can subsist for a short while on minimal returns. But such existence does not promote growth. Absence of growth is atrophy. Atrophy eventually kills. Growth is inescapable for organisational existence. Therefore, perpetuity has to be designed and weaved into organisational architecture. Sustenance and growth into perpetuity is sustainability. Sustainability goes far beyond its recent self-limiting association with organisational performance in environmental social and governance yardsticks.

Existence in perpetuity is deemed when entities don’t plan to down shutters. Organisations born with predetermined life expectancy don’t visualise growth. Those which plan otherwise, are fly-by-night operations which loot and scoot. Perpetuity is not applicable to them.

Fuel for sustainability is profitability. So, prima facie everything about business sustainability is about financials, the bottom lines! Can abundant profits ensure sustainability?

Is Profitability Sustainability?

Abundant fuel assures extended cruise range. But the structure must be built to overcome turbulences, capture headwinds and negotiate crosswinds. Otherwise, sustainability, even with huge quantum of fuel could be port afar, because unmanaged inherent asymmetries exert exponentially increasing drag consuming all the fuel at one’s command.

History is replete with examples of companies with attractive balance sheets vanishing into thin air. Profits, real or cooked up, couldn’t prevent extinction. Satyam, Enron, Lehman Brothers and such others could teach us a lesson or two.

If profitability couldn’t guarantee sustainability, then what does?  Definitely there is something else. What is it?

Sustainability Models

Simplistically put, sustainability is the characteristic, of an organisation, which influences current operations to ensure existence in perpetuity. Sustainability is about future-proofing tomorrows, today.

Easier said than done, tomorrows of a business, is a complex amalgam of environmental, social, and financial diktats. Each one, an important capital, often at loggerheads with others, needs to be ‘relationally managed’ to ensure sustainability. Each one has to be nourished without compromising the other. Thus, sustainable growth of a business organisation necessitates creation of governance models (ESG Models) that ensure balance amongst the trio.

Contemporary businesses have migrated en masse to ESG models for sustainable growth. ESG models are characterized by well-defined measurable yardsticks and tick-box adherences. There are highly evolved models that incorporate compliances and various business requisites. Business entities employ such models to evaluate organisational systems and processes. Unfortunately, even well-intentioned companies with well-defined, well-articulated policies and well prescribed methods and process fail.

Is the current ESG regime inadequate?

ESG Adequacy?

ESG is an unbelievably large canvas to draw from and therefore concept of sustainability cannot remain confined to any one approach or model. The number of approaches to adherence and compliances are varied and number of proponents of each model even more.

Businesses naturally adopt any one approach that suits their area of operations and gravitate to chosen areas to be in conformity with local laws. CSR activities, emission reductions, reusable energy, carbon audit and foot print reduction are some areas where companies evince interest. But most of them are compliance driven.

Some highly evolved ESG models incorporate business ethics and profitability into the monitoring and evaluation system. The choice, notwithstanding, each one ends in benchmarked processes with quantifiable and measurable parameters.  Does adherence to ESG norms alone ensure sustainability?

Processes have important role in sustainability so do people driving and operating it. Sustainability boils down to building organisational capabilities that encompass people and process.

Organisational Capabilities

The synergy cumulative of competencies of all individuals of an organisation and efficacy of processes is organisational capability. Accepted and collectively practiced value systems, that define and dictate how individuals and groups interact within and with the outside, represents organisational culture. Organizational sustainability is a derivative of organizational capability and culture.

When business entities succeed in creating and internalising a meaningful organizational culture that shapes strategic decision-making, define ethical boundaries for transactions, dictate operational activities and bind all stakeholders to it, it can hope for sustainability.

How does this brick-by-brick process happen?

Committed Competencies

Each organisation needs individuals with skills and competencies to achieve organisational aims. While each individual cannot be expected to possess all competencies required by the organisation, all individuals should have each competency required to discharge responsibilities assigned. Though onboarding would have been based on stipulated QR, it calls for continued refinement.

If organisational culture is conducive, each individual will excel not only in the core competency expected, but also acquit themselves well with additional skill sets, making them deployable in multiple area of operation. Presence of enlarged range and depth of competencies creates conditions conducive to sustainability. Chances of sustainability improves when competencies become commitments.

Organisational Agility

An organisation may come to existence to provide a specific product or service or a range of products or services. Unfortunately, demand for both products and services do not remain static in terms of nature, quality and content. The constant socio-economic-cultural flux that the world is in, demands consistently matching changes. While an existing product or service may be the toast of the time, it could be dumped at short notice.

The pandemic and associated unprecedented disruptions forced many a business to fold up. At the same time, new ones sprang up with unheard-of products and services. While those who reveled in the status quo were left to lament loss of opportunities, the agile ones seized opportunities the adversity provided. A whole new set of millionaires were created.

If an organisation can sense the need to change its product, service or process well in time and is agile enough to bring about changes in processes and methods, probability of sustainability improves.

The Fickle Capital

Businesses survive and thrive on stakeholder inputs. The promoter or equity holders alone do not dictate sustainability outcomes. The clientele, vendors, the society and all the elements of the value chain are important stakeholders in the sustainability matrix. Treating each one with care leads to brand loyalty. One-time creation of clientele and servicing them do not create brand loyalty. Loyalty comes from long time of pleasant association

A static loyal clientele does not guarantee sustainability. Unless an organisation continues to enlarge its loyal clientele, sustainability is a no-go. Loyalty, in times of aggressive market poaching, is a fickle attribute that succumbs to temptation. Disruptive pricing and alluring promises can lure away the loyal. Quality of product or service should be strong enough to resist brand credibility and loyalty erosion.

It is not the consuming clientele alone that matters. How an organisation treats its vendors and other elements of the supply chain, has a significant say in sustainability. When the going gets tough, it is the set of vendors, who render shoulders to the organisation. Unless stakeholders are treated well during harvest, sustainability will be the first casualty in adversity. Growing loyalty improves sustainability.

Teams and Networks

Organisations thrive on teamwork. Unfortunately, the concept of team seems to get confined to silos within organisations. In fiercely competitive organisations, teams are confined to verticals or less. Sadly, with raging cutthroat competition and interpersonal one-upmanship fostered by competitive comparisons, verticals shrink to segments, segments to groups and groups to individuals who don’t trust each other. Trust deficit is paramount and resultant dwindling retention, an epidemic. Teams do not live long enough to foster esprit-de-corps.

This is the ultimate recipe for disaster for organisational sustainability.

If an organisation can enlarge definition of ‘teams’, operationalise it to be more inclusive, and establish bridges of operational and non-operational relationships long enough to create kinship that can endure turbulences, probability of sustainability, improves tremendously.  It’s the strength of the network that helps identify, handle and overcome individual and organisational challenges.

Team longevity enhances organisational sustainability.

Leadership

Quality of leadership influences sustainability. Leadership is associated with vision and decisions.

It is the ability the leadership, individually or collectively, to define the desired organisational trajectory, understand the socio-economic, politico-cultural and environmental situations currently obtaining and likely to evolve, design interventions and apply course corrections that influences sustainability.

It involves predicting turbulences and generating a range of likely responses to negotiate and overcome challenges. It’s a risky affair. Unkind, but casually called ‘sound decision-making’, organisational leadership dictates sustainability.

It is only history and hindsight that can judge strength and weaknesses of decisions.

Operational Efficiencies     

It is not only people that matter. Processes have an important role in dictating sustainability. The bottom line is about operational efficiency, which encompasses a large array of activity. It encompasses technology adoption, obsolescence management, market dynamics and interior economy.

Local civil laws and norms may exert pressure, forcing changes that involve capital. Decision on how long to continue with existing technology or process and when to dump those in favour of the newest technology doesn’t come without pressure on capital. Capture of new markets and retention of existing ones may need capital infusions. Delay in infusion may be suicidal whereas untimely intervention could even be counterproductive.

Dilemma of contesting existing profit margins with infusion of capital to stay ahead is not new to leadership, but every time it's a challenge. That is when leadership and decision-making become demanding and exiting.

Sustainability Mantra

Without right leaders and led and without right processes, business can neither sustain nor grow. There is no single mantra to achieve sustainability.

Sustainability is like riding the high seas. Neither two waves nor two storms are same. Every calm is a whisper of an impending storm. It is for the captain and crew to negotiate waves and ride out storms. 

Leaders must foresee waves and storms and prepare the led to take on the fiercest. The led must relentlessly press on. Only then can they triumph.

Sustainability isn’t easy, else empires would have persisted.