Friday, April 6, 2012

The Hidden Key to Productivity

Every company worries in some way about how to make people more productive. To do this, most companies normally focus on two things: training – building knowledge and skills, and technology. No doubt this does yield returns. However, there is something else, perhaps even more powerful, that is largely ignored.

Productivity is how much you produce or create within a given period of time. Therefore, it has an implicit rate component to it. This means how productive we are depends on how fast and how effectively we act. Our knowledge and skills certainly play into how effectively we act and technology can speed it all up. The other hidden component, however, is how fast and effectively information travels through an organisation every day. Information about who else is doing what, information on resources in the company and the larger ecosystem, information on happenings in the market and about customers – the general buzz and chatter. If you don’t know about something, you can’t incorporate it into your planning or decision-making. You can’t act on it. This is true not just for companies but for societal productivity and progress in general. Still, the value of how information flows through the company seems sort of intangible. Just how valuable might it be to employee productivity? How do you put a number on it?

Wednesday, February 8, 2012

Microfinance: Time to move towards financial inclusion

As printed in the Economic Times

The numbers that describe India's economy are mindboggling. Just one-tenth of the population participates in the formal economy. Of these, only about 35 million pay taxes. That's less than 3%.

No wonder then that our economy produced a GDP of only $1.42 trillion at last count, about the same as that of the city of Tokyo which has a population of 35 million. There are simply too few producing value and wealth in India and so there is not enough to go around.

The financial inclusion agenda so far has been largely focused on redistribution of wealth while what is required is inclusion in the creation of wealth. Financial inclusion so far has meant debt distribution and nofrills bank accounts.

Microfinance has been one major channel of debt distribution to the poor. While the original assumption was that these loans were for investment in micro enterprise, the Malegam committee report in 2010 indicates that 75% of the loans went towards consumption. Contrast this with the distribution of bank debt in India where less than 20% were consumer loans.