Ever since the American economy went bust and the European economy has been going down, it’s sad to see my favorite magazine, The Economist, frantically trying to defend the wrong and go wrong by criticising the right. Time and again. Just a handful of weeks ago, in their frantic effort to criticize everything Chinese and everything non-market oriented, The Economist did a cover story called The Rise of State Capitalism (January 21-27, 2012). Basically, the story talked about how economies like China and even India are becoming more dependent on large public sector units and how this is bad blah blah. The obvious supposed scare is that public sector corporations are inefficient, have time overruns, invariably have cost overruns, have ingrained corruption and so on! The real scare is the growing might of China, of course!
Our group is into almost all kinds of consulting activities and we rarely come across a private sector company where an executive doesn’t ask for a bribe before awarding a big contract. Sometimes we’ve even found out that a competing firm has used sleaze to satisfy the client being prospected and thus has obtained the deal. From Enron to Olympus to Accenture, there is no dearth of large corporations which have made the most corrupt of choices. Large companies – whether public or private – always have within them certain ingrained issues. And what differentiates them from one another are systems and leadership. Under a different leader, the same GE could be the world’s best benchmark example while under another, in just a matter of a few years, it could be a struggling joke! The same it is with the public sector. If systems are put in place like the private sector, there is no innate reason why public sector corporations should be inefficient. And if systems go wrong, then you could even have a Reliance being rated worse than a public sector company to deal with.
As a management teacher, at least that’s what I have believed. That the former USSR failed or that China is nondemocratic doesn’t mean that the public sector idea is wrong. The only truth is that governments must know what to plan and what not to. A government, for example, has no business being in the luxury hotels sector; at the same time, in countries like India, the government not being in health or education is a crime. There are wonderful examples of public sector successes and one of them is the Delhi Metro Rail Corporation (DMRC)! It’s a case study of our times.
In the midst of times where corruption was the high point and scams were unearthed left, right and centre, in the midst of the massive CWG scam, here was a corporation in the same government sector, under the control of similar ministers and bureaucracy and in the same country, with a key role during the same Commonwealth Games. And yet, the legacy of DMRC has been diametrically opposite and mind blowing! For records, the Delhi Metro has almost always completed projects before time. In fact, the first phase of the DMRC project was completed in seven years instead of the planned ten years. DMRC has had absolutely no cost overruns. Its efficiency is beyond any kind of international comparison with the trains being on time 99.97% of time! That too with a very strict guideline of one minute deviation as the standard of excellence – while internationally, in most countries, they term a 3 min deviation from scheduled time as on time! By all international standards, the Delhi Metro is world class and it was competed in the second shortest time in the history of the world as far as metro constructions go! And finally, to top it all, it has had no instance of corruption and it is as massive a corporation as it gets!
So what made the difference? Meet the man who was at the helm of it all Mr. E. Sreedharan and you will know! I have a theory – the corruption index of a man is always on his facial muscles. It’s not about being traditionally good looking or bad. It’s about the reflection of your thoughts on your face. The man who spends his life asking for bribes has a dirty bribe-seeker look on his face along with the look of someone who has an inner fear of doing wrong and getting caught. A reason why all the professors in our institute look distinctly different from the majority of the politicians in our country! Yes, E. Sreedharan looks like the former ones, my professors who taught me! Clean, honest and sincere! And when he speaks, he exudes integrity – growingly the rarest virtue!
“Four simple principles,” is how he explains his success story! The key to DMRCs success has been integrity! Yes, that’s what Sreedharan looked for first in his people! He wanted a free hand in selecting people and consequently got his old work acquaintances and others who were known to be totally clean to work with him; yet, he fired them at the first instance of an attempt to be corrupt! Integrity was his absolute top priority. It was followed by something that is interestingly massively linked to integrity! Professional excellence! The rule is simple. If you are talented, you are in a better position to not just deliver high quality results on time but also be more ethical. Those are the non-talented guys who retain their place mostly through corrupt practices! So within DMRC, Sreedharan had no place for the less talented! The focus on efficiency was so much that he did away with clerical staff! Today’s offices required no clerks; in fact, that’s from where the delays and corruption start! With these two key principles in place, the job was more or less done!
However, he applied two more principles! He made the entire organization become obsessed with timelines. So, from coming to office on time to delivering their promises on time, the entire DMRC staff knew there was no way that the focus on being on time could be neglected! No wonder that Delhi Metro has an amazing 99.97% punctuality record! And finally, he focussed on social responsibility – from voluntarily opting to plant a hundred trees for every tree that had to be uprooted to the meticulous cleanliness social responsibility that he chased passionately! No wonder such a huge project took place and yet we rarely saw filth or jams!
That’s the E. Sreedharan way to managing state capitalism efficiently – with 99.97% efficiency! And you bet DMRC is damn profitable as well. Sreedharan is that example who keeps our faith alive on honesty as normal citizens fed up with corruption and as a management and economics teacher (who believes that the government still has a huge role to play in our development), the faith alive on the fact that state run enterprises can be efficient, honest, world class and very profitable! It’s the leadership that makes all the difference! In a nation, in a public sector unit and a privately run Satyam!
- 09 February 2012 |
- Dr. Arindam on Indian Economy