Saturday, October 18, 2014

Business @ the cost of principles

Bribery, or "commission" as it is colloquially called, is a very real fact of doing business in India. Waiting for the "ache din" promised to us by the Modi government, businesses have to deal with the reality of greasing greedy hands. And i am not talking of the government only.

Bribing government officials to take things forward is something we have even stopped looking at as a crime. It is something we have accepted as gracefully as we accept say an excise duty or a service tax - a percentage we HAVE to pay to the government to make things move.
FICCI and Pinkerton, in their India Risk Report 2014, have mentioned corruption, bribery and corporate frauds as the no. 1 risk in doing business in India. It is a risk, Indian businessmen - big and small, have been taking, since time immemorial.
 It could be the sales tax officials, the excise or customs officials, petty government servants at the octroi post, the passport office, the labor commissions, factory inspectors and anyone remotely affiliated to the government.
They might as well make it legal and tax all business transactions the "bribe tax" - to be paid directly into the account of the bribe receiver by the bribe giver. Might as well make it easy and traceable for all. The tax could also be made voluntary - to be paid as per the rate of urgency and the depth of the pocket of the giver.
All clear and precise for all. Why hide something that has no shame value?

Here, i don't want to talk about this type of bribery.
Our business, rarely, needs to deal with the government (thankfully!). Our supply to them is limited, our interactions with them are purely of a statutory nature.
What does affect us are transactions with private enterprises.

On the whole, the belief is that bribes should not exist in the private world of efficient businesses. After all the whole structure works on competitive pricing, efficient manufacturing and trading systems and merit based decisions. Without these, the enterprise cannot succeed.
Also, the system always starts with a person asking for bribes, no one wants to voluntarily part with their money for unproductive reasons. So, here i want to talk about this phenomenon where the person feels that asking for a bribe is OK, without fearing any adverse consequences.

Surprisingly, we have observed at our unit, that the smaller the enterprise, lesser are the chances of people asking for bribes (this is purely my observation based on dealings in our factory with no statistical support). The reason is that the owner / top manager is in touch with the ground reality and most of us don't want to support the practice of bribery. So, closer the owner or top manager is to the ground level, more the chance that he will exercise his power to keep efficiency and fair competition and not resort to asking for favors to take things forward. The logic is clear - the aim here is to get good quality products, from a competent supplier, at the best price without inflating the cost or disrupting the relationship with the supplier. (A lot does depend on personal relationships here, of course business good coming first).

However,  as the organisation gets bigger, people at the purchase department start asking for favors from the suppliers to pass their quote forward, ignoring the real factors by which a supplier is to be judged - the quality of his supply, his pricing, the regularity of supply, his lead time etc. Of course, these are important considerations but when you have many suppliers vying for the the same supplier post, these purchase managers are in a position to base their decision on the bribes received, just like any government official.

So what can be done?
There are only two ways this problem can be looked at - you pay the bribe, include the cost in your product pricing, get the supply and be happy. This is the easy way - but this way does not lead to the "ache din" dream that every India holds now.

The other way is the way of the idealist - You have a strict principle in place - "we will never pay bribes", It does sound very idealistic, and you have to be prepared to lose the business. It is a hard way, but it can be done.
We do it at Abhishek Enterprises.
We have instituted a rule - We will pay no bribes in cash.
We will take the purchase managers out for dinner and drinks, we will buy them Diwali gifts in the form of dry fruits and sweets (this is something we do for all our suppliers and customers anyway). But we will pay no cash to push our products through or to procure any order.
This was a principle instituted by my dad, with a practical corollary - be prepared to face the consequences of this rule in the form of orders and opportunists moving away from you.
But, pay no bribe.

This is relatively easy for us now. This was not how we started, we started the same as any business. My dad and his partner started it from scratch, with no guarantee of money coming in, and in that situation you tend to go with whatever works, but when you reach a point of stability, and now that we have, the one thing my dad says is "bribes don't matter - not then, and definitely not now."

The real test of the principle is when you want the job so badly, but you say no because your principles mean something more than writing on a scrap of paper. And as my dad thinks, you want the job, your product is competitive - then you will get the job. And you don't get sucked into the vicious cycle of bribe taking and giving, and one person, then another and another organisation and its nerve wracking to keep everyone pleased and greased!

After all these years, and with all his experience if he feels that you can stand tall and make a ton of money solely on the basis of your confidence in the quality of your product, we young managers should definitely  look at it as a valuable lesson learnt. It is these lessons, buried under the normal course of review meetings and daily operations, that are the cornerstone of business, and are never taught to us in a business school.

We are taught how to calculate net profits and returns on investment, but are never taught the hidden, huge costs of money and morale when a business indulges in malpractices.
We are taught the best HR theories, but are never taught to nurture and gain the trust and loyalty of the people working for you so that they always work for the betterment of the company and its culture.
We are taught what leadership qualities to nurture, but not everyone is a leader as soon as they graduate business school. We have never been taught how to be good followers, how to work  for a company and how giving or accepting bribes is a complete no.
Lesson of corporate social responsibility, is one chapter in some subject and glossed over, or case studies of huge corporations making billion dollar donations to some charity. What do these mean for managers or small business owners or entrepreneurs, when in many companies basic facilities of toilets and dining tables are not up to the mark?

And for these very reasons values of a company are very important. Not values written on a piece of pretty looking paper and stuck in the lobby, and vaguely worded that even the person who made them up is not clear about their actual meaning, forget the values percolating down to the the person at the ground level.

But, values that have meaning in this uncertain business world, values that are simple and that people can relate to. Values that the top management embraces and believes in, so that everyone knows their importance.

Values of simple commitment - commitment to good business practices.

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