Corporate Transformation: From Cost to Time

Growing up in a middle class home, I have pretty much got used to worrying about cost. Going on a holiday? What’s the best deal you can find? Buying a coffee table? What’s the best price you can find for that size and quality?

In recent years, there has been a new challenge. On getting overworked, and with budgets not a big issue, the issue was, how can I plan that holiday within that limited time? How can I buy that furniture fast and right? Can I do all this today, and still get a good night’s sleep?

Optimize for Time: That’s when the thought struck me. Rather than optimizing for Cost, I need to optimize for Time. Productivity is more important. Speed and accuracy may cost more, but are a better option.

This needs a radical rethink of the way we make decisions. One way to do this is the digital tools available. E-commerce for buying? Check. Travel websites for holidays? Check. Doing everything yourself? No, no. Outsourcing of design and execution? Check. The other way is outside expertise.

In corporate environments too, a more precious commodity than budgets, is the time of the workforce. How can we do this work within this time constraint? Planning and project management tools? Check. Portals, collaboration tools and email for employee collaboration? Check.

An example that comes to mind is the Bangalore Metro – BMRCL. Eleven years after it was set up, the firm has recently bid out for Project Management software that can capture the complexity of its work, help tie the loose ends and do work on time.

Corporate Objectives: Business or Group Leaders with large teams in place have instinctively moved to Time optimization for their teams. The team is fixed (in the medium term) and everyone is on a salary so the objective is for the team is to work better together, and do more. The workload should also be well spread across the team rather than a few getting overworked even as others are relatively free.

What’s changed is the tools, and outsourcing and digital options we have to do this in practice.

Software versus Jobs: Another mental constraint some of us struggle with – is the use of software going to result in the loss of jobs? Is there a trade off between use of software versus number of jobs and employees? This may be true of some legacy bloated PSU firms where employee collaboration is by physical files and paperwork. Collaboration software surely helps teams work better and faster with fewer people. But many of the non collaboration digital tools that we now have access to are just outsourcing the work to another organization that can do it more efficiently. This organization does the work, and grows, while your firm becomes more focused. In effect, total employment may not be affected, but productivity improves.

Example – Second Generation PSUs: The second generation PSUs in India have been set up without legacy workforces and are super focused on their core competencies. Petronet LNG, IRCTC and CONCOR come to mind. They have their own employees handling senior management functions and the core work. Non core work like security, facilities management, recruitment, routine procurement, travel, logistics, canteens, etc. can and are being outsourced to competent agencies. Keeping the core staff low.

The ‘L1’ dilemma: Indian PSU procurement and tendering is famous for awarding projects to the ‘L1’ bidder. Looking back at the performance of projects bid out, perhaps the L2 or L3 bidder would have been a better choice if the primary criteria was not just price, but also Speed, reliability and Quality of work. So many projects flounder on execution after the bidder realizes he is in losses or is unable to handle project challenges. The Total Cost of a Project includes Project bid value, real costs of project, time of project and maintenance for the life of project. So here also for better success rates and performance, the tendering process needs to be ‘L1’ for Total Cost of Project, incorporating a probability of timely completion and penalties and counter guarantees. This is harder to judge, but its time our decision making advances, and gets better results.

Cheers and success to you. Comment on this article if you find it interesting.

Punit Jain

DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. This is not an equity research or investment report. Any mention of companies in this report is to illustrate a point and we make no comment here on valuations or investment attractiveness. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s