Mid Tier Companies Need to Adapt 5Es Going Forward

Neel Shah, Chairman & MD, Insight Business Machines explains the 5Es and also explains three ways of salary disbursement strategy.

* How do you see the cash flow problem impacting mid-tier companies?

 There are multi-fold impact as per as cash flow is concerned for mid-tier industry that includes, my organization, my industry and our IT industry as well. Inward cash flow has completely dried off. You do not know when your inward cash flow is going to arrive to you. There is no concrete forecasting which is happening as of now. Outward flow is fixed, electricity bills, salaries. Of course, from our perspective, the cost which is impacting on a very bad manner, impacting our entire P&L is the salary to r employee.
These are the fixed outflows. Then there is vendor payment. Now when we talk about a payment going out from our side, there are always going to be PDCs (Post dated cheques) which are attached and which we have already handed over to our distributors or our OEMs.
Now, having said that, your customer, who is going to pay you there is uncertainty. Therefore your outflow, which is fixed because you already handed over the PDCs to your OEMs or vendors and distributors will come under challenge. Although currently distributors are facilitating extended payments but still the major impact is going to be there because of this imbalance of your inflow v/s outflow.

How would these companies ensure salaries to employees to keep their morale up?

In our industry, people are as of now thinking of this in three manner. One is going to be effort- based or performance based salary. The second is going to be deferment of salary. And the third one is going to be on time sheet-based. All three are currently in discussion phase. When we talk about time sheet -based salary that will take you to a situation when you would be able to pay on an early basis to your employee. That will enable you to get part timers into your industry or in your organization having a performance majeure out there. That is one way of looking how the salaries are going to happen in the coming days over the six months. Time sheet need to be adopted really fast. That is what European countries and Western countries are doing wherein they are paying early basis salary or on weekly basis. That is point number one.

The point number two is going to be on a deferment basis. You create a slab within your organization, for any hypothetical purpose of say Rs 40,000 a month as a layer, Rs 1.5 lakhs as another layer or beyond would be layer number three. Then you do a deferment of salary like up to some level you have not going to cut anything, or maybe 75k plus, you are going to release 70% now, 30% later on and so on.

The third is basically going to be performance based where in whichever you feel is NPA, you ask them to move out of the organization and balance again. You relook at the kind of cash flow you do have and have a salary cut and give it to them. The impact after COVID19 will be even longer than during COVID19.

* How would you suggest balancing the strategy of retaining existing customer v/s acquiring new customers?
Typically, when we look at acquisition as a term, I believe it is part and parcel of how you approach your customer or how you approach the market.
What I believe is that all this old Before COVID19 strategy will have a dramatic and drastic change. Now we are coming into quarterly strategies and looking at how COVID19 is moving towards DC19 phase. Every time the strategy is going to be realigned with your business and your customer expectations. For a new strategy that mid-tier company need to adopt, which is 5E.

E for engage, explore, educate, encourage and evolve. This generation needs to adapt first is engage: engage with your employee because they are your asset. Be it a technology company our asset is our people. So, engage with your asset that is your employee and with your customer. This is the first phase of engagement.

Second thing is, once you start engaging, you will understand that there are some new areas, new pain points your customers t are going through and that will help you to explore, new business, new opportunities and new ways of doing business. So explore is the second E out of these 5Es that need to be in your strategy.

The third is educate once you explore and the educate. When we look at current time, we are using Zoom and I believe a couple of days back, Zoom was in the news for some security glitches and some data leakage and all. This is going to be another opportunity for mid-tier to explore. Go and talk to your customer as far as collaboration tool is concerned, which is virtual meeting, video conferencing and there are multiple things that you are going to find.
When you explore, you come to know about this and you start educating your people, your employee. This is going to be continuous skill monitoring and up lifting process that educate your people, educate yourself to move to the next phase of your business area.

The fourth E is encourage, “encourage your people,” your employee with some kind of reward and recognition. Let them earn when they do some kind of certification and keep on continuously up scaling their skill level. This is going to be a fourth E, which I believe need to be part of our strategy.

And the last E is Evolve. Once you follow all these 4 Es, what will complete you 5 E is going to be the evolving of your organization What we were doing before COVID19, we used to sell, sell, sell, sell and then service our customer and then after three year, we are going there for maintenance contracts and providing them services. During COVID19 this is not going to help. Serve your customer, and though you may not be paid for that service initially and then sell afterwards. So, serve, serve and then sell is going to be a part of our new strategy. So in a way, service and cater today to your customers and sell later. There is going to be a next phase of digital transformation. The people who have not adapted digital transformation will now adapt.