About Family Businesses – Part 3 – Asrar Qureshi’s Blog Post #709

About Family Businesses – Part 3 – Asrar Qureshi’s Blog Post #709

Dear Colleagues!  This is Asrar Qureshi’s Blog Post #709 for Pharma Veterans. Pharma Veterans welcome sharing of knowledge and wisdom by Veterans for the benefit of Community at large. Pharma Veterans Blog is published by Asrar Qureshi on  WordPress, the top blog site. Please email to asrar@asrarqureshi.com for publishing your contributions here.

Photo Credit: Forbes.com

Photo Credit: Google Images

This series of articles partakes from some material published in INSEAD Knowledge. INSEAD is in France and is highly ranked among the most prestigious business schools of the world.

We continue with the positive factors which have helped pharmaceutical companies grow. Our focus is on local, generic pharmaceutical corporates.

Infrastructure, Policies and Processes

The lynchpin of sustained progress is development of appropriate infrastructure, policies, and processes. The infrastructure is formed as the needs evolve. Successful companies keep identifying the need and evolving the infrastructure accordingly. New positions are added where required, functions are added or taken out from one head to be made independent, and so on. Let us say, a finance/accounts team comprises of five people today, and they are doing all functions. As the business grows, the need arises for separating the accounts team, the people who deal with the banks, those who deal with imports, vendor payments, costing, budgeting, planning may need dedicated people. It is an investment into ensuring smooth operations, not an increase in expense. Long time back, it was market trend in Pharma to make one more company when the first one reached about 400 millions turnover. The new company was not a spin-off of the previous one, it was a new company starting from zero. With hindsight I understand that the first company’s infrastructure and processes could not support higher volume of business, so, they formed a new company rather than strengthening the existing one. It meant that further growth of the first company became stunted, which it did. 

As number of people increase, the need for clearly defined policies and processes increases. The few people who were there since the beginning could work because the operation was small, and operators were few. They just talked to one another and/or improvised and the work went on. Larger staff, with new hierarchy, and new people cannot work this way. They must have clear guidelines, process flows, approval procedures and guiding policies. 

The argument that there are so many companies doing roaring business without a system, is a misunderstood fact. If you get into such companies, you will find two major issues: one, is waste of time (our biggest resource); two, waste of resources. The counterargument is that if a poorly run company can do such good business (maybe they have an irresistible product), how great it would become with the development of appropriate infrastructure and policies.

Delegation

An integral part of infrastructure and processes development is delegation of responsibilities and authorities. It is somewhat thorny territory, but the progressive corporates have tried to overcome to tendency to centralize in many ways, and they are successful. Lack of delegation is not just seen in case of entrepreneurs; it is seen with all managers. Our patriarchal social fabric and feudal (owners/owned) background compels us to be possessive about our authority, our expertise, our position, our knowledge, and stops us from sharing. In addition, most managers are inherently insecure, and running everything around them makes them work harder but they feel secure with it.

Progressive managers have taken many steps to promote delegation. Management teams, cross-functional teams, clear job descriptions eliciting responsibilities and authorities, are some measures which corporates have taken. 

Delegation is not just sharing or handing over authority. It is a three-step process in which the person is first primed and enabled to take up the responsibilities, then it is transferred and monitored, and then the process is completed with giving responsibility and relevant authority. Hasty delegation may lead to poor performance and misuse of authority; delayed delegation may cause demotivation, disengagement, and poor performance. 

Development of defined policies and processes is a safeguard against misuse of authority. That is the reason I have put delegation after development of infrastructure, policies, and processes.

Limiting Discretion

Yes, it feels good to be able to do what we may like to do, take decisions, reward, or penalize people, and be the symbol of authority and power. But, over time, it is highly damaging to business and employees. People do not focus on work, which is assigned to them, they focus on pleasing the boss to survive or extract benefits. Discretion is liable to cause disparity which creates feelings of unfairness and injustice. Employees may be actively disengaged which again causes waste of time and resources.

All progressive managers/entrepreneurs gave up discretion in good time. They referred all decisions to follow the standard policy for everyone. Limiting/ stopping discretion from the top is a clear message that all decisions shall be made through a process which will not be influenced by anyone’s position. Some amount of manipulation is possible even through system, but mostly it works better.

This completes the discussion on positive factors. Next, we shall take up negative factors and some of these may be reversed. I wish to add two points here. One, the success of apparently rogue companies is not in line with these arguments. There are other factors which can make the business successful in value while its employees may remain miserable, underpaid, unappreciated, and underperforming. It should be noted that such companies fare poorly on account of customer service/satisfaction also. Both factors together may take the company down some day. Two, the companies with smaller volumes are highly vulnerable and may collapse anytime. Presently, a pharmaceutical company with 500 – 1000 million annual turnover should be considered small and highly vulnerable.

To be Continued……

Disclaimer: Most pictures in these blogs are taken from Google Images and Pexels. Credit is given where known; some do not show copyright ownership. However, if a claim is lodged at any stage, we shall either mention the ownership clearly, or remove the picture with suitable regrets.

https://knowledge.insead.edu