By Dr. Anil M. Naik, Management Consultant
Article
In the present era of globalised business environment,
corporate history has shown that it has become more difficult for successful
organisations to remain successful. The corporate world is full of examples of
companies such as Nissan Automobiles of Japan and I.B.M. of U.S.A. taking a
knock. A study of such companies has identified managerial effectiveness as the
essential element for any organisation to remain successful in the present
dynamic and continuously evolving business environment. It is interesting to
note that Arthashastra, a treatise on Economic Administration, written by
Kautilya in the 4th century before Christ, identifies managerial effectiveness
as the key element for continuous prosperity and growth of any kingdom.
Kautilya has identified eight elements for managerial
effectiveness as under :
- Leadership
- Strategy
- Structure
- Execution
- Culture
- Talent, Temperament & Technique
- Innovation
- Strategic Alliance
Interestingly, these eight elements have also been identified
by a study made by the MIT Sloan School of Management, of successful
corporations in the decade of 1991-2000.
Kautilya wrote Arthashastra as a guide for ‘those who govern’
after studying ancient literature such as Atharvaveda, Brahaspati Sutra and
Mahabharata. Kautilya identified these eight elements as essential in the
practice of governance for growth and prosperity.
Kautilya explains each of these eight elements as under:
Leadership :
Leadership in society rested with Swami, the king, and
leadership essentials, such as duties, responsibilities and strategies are :
- A king who observes his duty of protecting his people justly, according to
law, goes to heaven, unlike the one who does not protect his people or
inflicts unjust punishment.
- A king, who flouts the teachings of Dharmashastra (values) and Arthashastra,
(material well-being) ruins the kingdom by his own injustice.
- A king has responsibility for promoting economic well-being by preserving law
and order through developing extensive administrative machinery.
- Duties of a king in internal administration are three :
- Raksha : Protection of the state from external aggression
- Paalana : Maintenance of law and order within the state
- Yogakshema : Safeguarding the welfare of the people
- A king has to understand that prosperity of the state and its inhabitants
cannot be maintained continuously, unless new territory is acquired by
settlement of virgin lands through conquest or alliance.
- Self control, as a discipline, is essential for a king. Self control can be
acquired by controlling six emotional devils, such as :
- Krodha : Anger
- Kaama : Lust
- Lobha : Greed
- Mana : Vanity
- Mada : Haughtiness
- Harsha : Overjoy
These leadership essentials are relevant to our corporate
world. They highlight the responsibilities and duties of any CEO, both in
internal administration as well as in developing strategies for expanding the
operations of a corporation.
Kautilya defines a wise king as Rajarishri and highlights the qualities which are necessary for a wise corporate leader of the 21st century. These qualities are:
- Cultivation of intellect through association with elders (experts)
- Striving for improvement of own discipline by continuous learning in all relevant branches of knowledge
- Keeping vigilance on challenges and threats to security and welfare of the state through developing process of accurate information gathering
- Developing capabilities through specific efforts to enrich people and doing good to them
- Ensuring observance of Dharma through practice and setting one’s own example through-out the kingdom
- Power of reasoning, based on strong and clear intelligence, can prevail over external circumstances and shape events. Victory is assured when one sees things as they are and shuns illusions
- Developing self control through controlling emotional devils
- The king should be ever vigilant and protect himself against machinations of his own min-isters
- Educating the successor through providing education to the Prince in Dharmashashtra, (ethics), Arthashastra, (economic administration) and Dandaneetee (protection).
The above explanation about leadership in Arthashastra is universal and is relevant even after 2000 years.
Strategy :
Kautilya defines objectives of an organisation as :
- Acquire power
- Consolidate what has been acquired
- Expand what has been acquired
- Enjoy what has been acquired
This set of objectives exactly meets the concept of economic performance developed by management scholar Peter Drucker in 1951 in his article on ‘Concept of a Corporation’. Drucker’s concept of economic performance is based on the following strategies :
- Make present business effective
- Identify potential and realise it
- Make it a different business for different future
To meet the objectives of a kingdom, Kautilya identifies two sets of strategies, internal and external. Internal strategies focus on making the state i.e., kingdom, effective and efficient. External strategies focus on the challenges to the kingdom, in terms of opportunities and threats from external environment. Kautilya’ s inputs in strategy evolution are as under:
Internal strategies :
“A king can rule only with the help of others. One wheel does not move a chariot. Therefore, a king should appoint advisors, councilors & ministers and listen to their advice.”
A king should govern by the Rule of Law, Dharma and Nyaya which alone can guar-antee security of life and welfare of his people.
A king should develop self discipline and encourage others to develop self discipline. Self discipline can be developed through mental faculties, such as
- Obedience to a teacher
- Desire and ability to learn
- Understanding what is learnt
- Capacity to retain what is learnt
- Ability to make inferences through deliberation on what is learnt
Social order should be maintained through
- Legal framework designed specifically to enact laws and control unsocial behaviour and to dispense justice
- It is also necessary to take initiative to enact or promote new laws as per the need of the situation
- Clear regulations regarding penalties with regard to fire, hygiene, sanitation, privacy as well as consumer protection are essential for any kingdom.
- The route to wealth is economic activity and lack of it will lead to material distress. Hence productive forests, mines, cultivable lands, water reservoirs, production and storage units have to be established to nurture and promote trade and commerce.
- Creation of a network of secret agents, gudha purush, is essential for security of the kingdom as well as for expansion by conquest.
External strategies:
- External strategies of a king should be based on power equation between two kingdoms.
- Power is not a factor which is constant over time. Power can be influenced by intangible and unpredictable factors. Hence strategies to change power equation should be based on identifying such factors.
- A king should always keep long-term advantage in mind and should be willing to sacrifice short-term advantage for a distinctive long-term gain.
- When faced with a strong king, a comparatively weak king should always remember that in the strength of a strong king lies his weakness.
- It is always advisable to have allies, Mitra, for strategic alliance which would be necessary to ward off the designs of a strong king.
- Acquisition of another kingdom, Sangha, is more desirable in the long term than an alliance.
- Every external strategy should be based on Mantra, the sum total of good counsel, analysis and judgment.
- Sangha, that is kingdom, can be raised to a condition of greatness and power by taking advantage of a stroke of fortune or by treachery. One needs to study from history how successful kings have analysed the environment and developed strategies to win.
Structure:
Kautilya is aware that to execute any strategy, there has to be a structure with the king, Swami, at the head of the structure. However, he also shows his awareness of the fact that tall or hierarchical structure can be an impediment in successful execution of strategy. He advocates a ‘flat’ structure.
Kautilya, therefore, specifies that a king should have only four reporters. They are:
- Amatya : Prime Minister
- Purohit : Chief Justice
- Senapati : Chief of Armed Forces
- Yuvaraj : Prince/Successor to the king
He also proposes a routine for the king to meet his subjects to get a chance to verify information supplied to him by his reporters as well as to get a first-hand information about the success or failure of the strategies developed for the benefit of the kingdom.
Kautilya is keen to ensure that the king always gets correct information and which is cross-checked. Hence in his design of the management information system, he proposes the use of ‘Gudha Purush’ – the spy mechanism.
Kautilya’s stand on shorter span of control, such as ‘four reportees’ is accepted by major management theorists who emphasise on flat structure and sharp information gathering system for strategic decision making.
Execution:
Kautilya emphasises that successful execution of strategies is very important to meet the fundamental aims of any kingdom. He highlights that the important element in execution is power, ‘Dandaneetee’. He highlights four aspects of execution that are based on power. These are :
- Acquisition of what has not been acquired.
- Preservation of what has been acquired
- Augmentation of what has been preserved
- Distribution among those who deserve what has been augmented
These aspects can be seen from the point of view of the execution of strategies in the corporate world, especially in the present era of globalised world. He points out again and again that concentration of the king should be on exploitation of natural resources and development of national income.
Power that is needed for execution of strategy, ac-cording to him comes from seven elements of the kingdom. These elements are:
- Swamy : King
- Amatya : Prime Minister
- Janapada: People
- Durga : Fort
- Kosha : Treasury
- Bala : Defence Forces
- Mitra : Allies
These elements can be seen in the corporate world as under :
- Swamy : Owners or Board of Directors
- Amatya : Chief Executive Officer/Managing Director
- Janapada : Employees of the organisation
- Durga : Defensive Strategies
- Kosha : Cash Flow/Financial Position
- Bala : Specific skills such as Marketing, Operations, Finance, H.R.
- Mitra : Strategic alliances
Culture:
Kautilya promotes the idea of a culture based on Dharma and Nyaya (values and fairness) to ensure concern for fairness and civic responsibility through-out the kingdom. At the time Arthashastra was written, the constitution of a society was based on Varna, the caste system – different stakeholders. Kautilya highlights the roles of each stakeholder in the society and the king co-ordinates the role of each stakeholder for effective and efficient running of the kingdom. He, therefore, emphasises the importance of roles played by the lower castes and gives them the status of Aryas to connote the theme of equality in society.
His advice for developing a healthy culture within the society is based on teaching of Vedas. He emphasises the supremacy of Vedas by stating “The kingdom, when maintained in accordance with Vedas, will prosper for ever and not perish.” The concept of culture emphasised in Arthashastra is perfectly applicable to the corporate culture. The corporate culture will be fair and responsible only when everyone working realises the roles played by different functional areas such as marketing, finance, operations, systems and human relations and their importance for effective and efficient operations. Similarly, the culture within the orga-nisation will be strong and healthy when it is based on values and fairness as it would help create the corporate brand, which is essential for attraction and retention of talent.
Talent, temperament and technique:
Kautilya is very specific in terms of the officials to be appointed by the king for the administration of the kingdom. He specifies officials in three categories : Statesmen, Warriors & Artisans and specifies their duties. Statesmen have the duty of making laws and govern the state in accordance with the laws. The duty of the warriors is to protect people from both internal and external danger and the duty of artisans is to undertake economic activities to satisfy the needs of society.
Kautilya highlights talent and temperament as the qualifications of officials to be appointed by the king. He advises the king to make a thorough check on the prospective candidates. He sets out a procedure to select suitable candidates as under:
- Family background, nationality and amenability to discipline of the candidate should be verified from reliable people.
- Knowledge of functional areas should be verified by experts from different functional areas.
- Intelligence, perseverance and dexterity of the candidate should be evaluated from the past performance.
- Eloquence, boldness and presence of mind should be ascertained through a personal interview.
- Closely observing how the candidate deals with others will show his energy, endurance, integrity, friendliness, loyalty and ability to suffer adversities.
- Health, character, strength, amiability and love of mankind of the candidate should be found out from his close friends as well as personal observations.
Kautilya is very specific in suggesting that even after appointment, the king should test integrity through a variety of secret tests. The tests should highlight the qualities such as Dharma, the values, Artha, the financial judgment and Nyaya, the sense of fairness.
Kautilya highlights the importance of effective thinking for success. He emphasises study of history as it reveals the essential features of the historical processes and provides an insight into cause and effect relationship, which in those times was attributed to chance or providence. Kautilya states that chance or providence is not to be considered as given. Chance and providence can be brought under human control through systematic thinking.
The technique to merge talent and temperament is necessary for success. According to Kautilya, this lies clearly in the hands of the king, who should develop the art of getting the best out of his people by regular assessment, rewards and promotions for effective and efficient officials.
Kautilya’s thinking on talent, temperament and technique provides an ideal platform for designing corporate H.R. policies. His ideas highlight the need for identifying training areas required for continuous growth and for controlling attrition, which is a major concern of H.R. specialists in the corporate sector.
Innovation :
Kautilya in Arthashastra identifies innovation as a key element in war and covert operation strategies. He has been blamed by the western historians for proposing gudha purusha system, that is spy mechanism. However, considering the challenges to a king in those times, this was a unique innovation for safety of the state.
Kautilya provides a variety of options for selecting secret agents. These were mundajatila, the shaven headed ascetics, a sadhvi, the nun, a rich widow, orphans, dumb persons, astrologers, readers of omens, barbers, caterers, among others. The selection is based on the fact that these persons have social acceptability and are invited by villagers to come to their houses and also stay there, if the need arises. Hence, they have easy access to information. These agents were to be trained in sign language, palmistry, magic and illusions. He also points out that transmission of information gathered is important and this needs innovative ways. He identifies ways such as songs, story telling, signals and signs and hidden messages in the musical instruments.
In terms of war strategies, Kautilya emphasises the importance of innovative moves for victory. He identifies incidents such as a weak king facing a strong king in the battle ground and states, “In the strengths of the strong king, lies his weaknesses.” He illustrates by providing an example, such as when faced with an elephant brigade, the weak king needs two crocodiles. He highlights that the elephants are mightily frightened of crocodiles and when confronted by them, they will try to turn around and run, and hence crocodiles will foil the attempt of the strong king to trample over the army of the weak king.
Kautilya also points out that power, time and place are interdependent and any event is a total product of these three forces acting and reacting upon one another. Hence he claims that success does not belong to divinity, that is, Daivam, which is considered beyond man’s control, but belongs to Manushyam, that is thoroughly seen by man and brought under control. Manushyam is based on effective and timely thinking ability of a person.
Another innovative idea Kautilya provides is benchmarking. He advises the king to identify cultivation and trading practices as well as war strat-egies of the neighbouring kingdoms, which could be deployed for better output and trading gains and security throughout the kingdom.
In the corporate world of the 21st century, innovation has been accepted as the key element of success in the globalised environment and some of the examples from Arthashastra are good pointers for devising strategies to win in the market place.
Strategic alliance:
In the globalised corporate world, to enter into new markets and to develop competitive advantage, strategic alliance has been identified as an important strategic move. Strategic alliance, in principle, is a tie-up between companies which bring their specific core competencies together for specific products or markets, while keeping their individual identities. It is not a merger, but an alliance for growth, a basically win-win situation for both parties. In the recent past, Indian companies have started forming such strategic alliances to enable them enter foreign markets as well as to compete effectively in the home markets. To cite an example, Bajaj Electricals have made a strategic alliance with a Chinese company for making electrical components in China, which are sold by Bajaj Electricals in India as well as in other countries. Similarly, General Motors of USA have forged a strategic alliance with Sundaram Fastners for de-veloping and producing auto components for Indian as well as South-East Asian markets.
Kautilya has visualised the scope of strategic alliances for security and prosperity of a kingdom in the 4th century prior to Christian era. He identifies kings with whom a king can forge a strategic alliance as Mitra and classifies them it) three categories, such as dangerous allies, worthy allies and best allies.
Dangerous ally is one
- whose past shows that he has attacked an ally by joining forces with others or under the influence of others
- who has sold himself for a price to the enemy and withdrawn himself at crucial times
- who would change affinity due to weakness or greed.
Worthy ally is one
- who exerts himself on behalf of the alliance
Best ally is one who shows six qualities
- Ally of the family for a long time
- Ability to mobilise troops and resources quickly
- Has never betrayed a friend.
Kautilya points out that in choosing allies, one has to make choices, as there could be different options. He identifies such options by giving examples as under:
- If the choice is to be made between two allies, one who is constant, but not amenable to control and the other who is temporary but controllable. Many scholars felt that a constant ally, though not amenable, is to be preferred. But Kautilya disagrees. His choice is the temporary ally who is controllable, because he remains an ally so long as he needs help. The real characteristic of an ally, according to Kautilya, is giving help.
- If a choice is to be made between two allies, both are amenable to control, but one can give substantial but temporary help, while the other can give little but constant help. Many scholars would prefer an ally who gives substantial help. Kautilya, however, preferred constant ally even if he gives little help. He argues that the con-stant ally provides help continuously over a long period of time and therefore, contributes more to the alliance.
- If the choice is between a mighty ally who mobilises slowly and a less mighty ally who mobilises quickly, Kautilya prefers the one who mobilises quickly, as he states success depends on interaction between power, time and place.
If these choices can be seen from the position of options a company has in the present environment for strategic alliance, it shows an in-depth understanding of the issues which need to be tackled from the point of view of managerial effectiveness.
Arthashastra was written by Kautilya as a guide for those who govern. Throughout the treatise, he implies that good governance is based on managerial effectiveness and highlights areas a king should concentrate on for managerial effectiveness. His insight into issues involved in managing a kingdom effectively, makes his treatise an excellent guide for managerial effectiveness, which has relevance to the corporate world of the 21st century.
Kautilya challenges us to use these concepts.
