India Inc has a long way to go in strengthening its corporate performance for survival and growth in the changing environment, according a report by McKinsey & Company.
The survey, Out-executing the competition: performance ethic in India, covering 35 companies, some of which were McKinsey clients, and over 600 executives in pharma, fast moving consumer goods, auto ancillaries and other sectors, shows a direct correlation between the strength of a company's performance ethic and its financials.
According to Gautam Kumra, a principal with McKinsey, high performance companies are focused on operational controls.
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Those with the weakest performance ethic had a return on capital employed (ROCE) of 3.4 per cent below the industry average, compared with a ROCE of 4.2 per cent above industry average for those with a strong performance ethic.
While corporate India was strong on mission, targets and organisation, they fell short on performance feedback and consequence management.
"There is an incomplete information on individual performance, the lack of transparent feedback, and little appetite to differentiate based on performance. The costs of this are a weakened talent pool, decision-making delays in critical areas and lost opportunities," said Kumra.
Indian companies, said the survey, was unable to fully leverage its people asset, and that there was an over-dependence on values to motivate people.
While values were more prominent in owner-driven companies, they were often not grounded in business objectives and failed to impact performance.
Also, many Indian managers did not have the adequate skills to manage their businesses. Companies often did not comprehend the distinctiveness in financial and operating controls.
There were pathbreakers as well who made explicit choices on the coordination and motivation levers.
The findings were released at a CEO conference in Mumbai. "Companies are failing to adopt a leadership mindset. They do not set high enough aspirations and have insufficient capabilities to follow up once they do. They benchmark with local competition rather than interacting with world-class organisations," said Kumra.