Are Companies managing their human resources well ?

Are Companies managing their human resources well ?

Most companies run after all sorts of resources – capital , infrastructure , technology, products etc but are they giving importance to the scarcest of resources i.e employees ?    Now a days most businesses have outsourced their thinking to client . Simply put look the needs and demands of clients . Ideas of new product or service now mostly taken from inputs from clients . It is now a days believed by most of the companies that to be competitive the companies have to move from product centric to customer centric . Yes true till its working fine . What if the customer suddenly losses interest in the particular product or company ? Also since now everyone is looking at the same customer to provide some new idea then where is the difference creation .

Companies apart from taking inputs from customer should also create and nurture difference creator amongst employees . More than the stake of customer it is the stake of employees associated with the growth of the company . The more percentage of employee are there as difference creator the more competitive advantage the company has . How many companies in India really support ,nurture and reward difference creator . Every one consider a productive employee who meets the target , adds revenue to the balance sheet or works in synergy with his senior as best employees .

One has to understand that products have life cycle and also customers loyalty can not be taken as everlasting things . One parameter where the growth of employees in their career should also be how much difference creator they are . Difference creator means being innovative , thoughtful, creating impact , bringing change for good etc. Do companies have an effective mechanism of checking human skill , talents and competence or it is just the based on the feedback from seniors ? Training is one of the most less emphasised by many companies . Yes some have their calendar or training units but again its focussed more on product knowledge , soft skills , sales oriented etc . Have we seen any training of emphasising on creation and nurturing of  difference creators amongst employees .

The organisation should develop a culture , system , atmosphere where employees are motivated to be difference creator . There has been so many countries which are much smaller in population than India but we find them technogicaly advanced , producing better products and we just try to ape them or bring them to India.  Are Indians less intelligent than any other nationality in the world ? Why a nation of 130 crore can be a pioneer in industries , product etc . Reason is very simple there is hardly any culture , atmosphere or incentive for being a difference creator . The more as a company , as a Industry , as a nation we start recognising such individuals who want to create difference i.e rather than banking on the thought and demand process of client they are putting their brain ,mind, soul , heart ,knowledge , skills and thinking of bringing something new India will be also producing lots of new products and goods .

If we are the most populous nation then we should also think of leading the world w.r.t innovation in product , process etc . The Indian Engineers , Doctors , Scientist have prospered in USA but why not in India ? Time has now come that every company now look to groom and motivate such difference creator and who knows next coming decades can be all of India .  

Emotional Intelligence in Investment Advisory

Emotional Intelligence in Investment Advisory

Emotional Intelligence is to know your own emotions as well as those of others, self motivate and know how to monitor the emotions of others.

In India emotion plays a very important role in the life of most of the people and in their decision making. Investment products or financial products are not tangible where look, feel and touch can impact ones decision making. It is the belief, experience, faith and trust which influences the decision more. Ideally it should be the knowledge and logic that should be the core of investment decision making but that is not the case.

Do we treat our client as a revenue generator for our company or someone whose existence itself is must for my own better career and life? If we think client as a revenue generator then our approach is totally product centric, our own company centric and we try our best to convince him and get the business. But in this process have we for once really tried to understand what client really needs or wants? Every investment product is good but not suitable for all. Most investment product sellers are so much impressed with the feature of the product that they anyhow make it suitable for anyone.

If any investment advisor thinks that this client is useful for my own career, he will not do hard selling but soft selling. I will think him not as a mere revenue generator but a very much part of my team. He is no more an outsider for me but a very much part of my own success and growth. Here emotional intelligence plays a very active role.

We need to understand the components of emotional intelligence

Personal Competence – self awareness and self management

Social Competence – Social Awareness and Relationship Management.

Self Awareness is the ability to understand your own mood, emotions, drives and their impact on others.

Self Management – to control disruptive or impulsive moods and to think before acting

Social Awareness –ability to understand emotional characteristics of others and having skills to treat people according to their emotional reactions- empathy)

Relationship Management – proficiency in managing relationship and building network. The ability to find common ground and building rapport.

In investment advisory when we are interacting with client we should be cheerful, cool, calm and composed first. Pressure of meeting sales targets or revenue playing on your mind, your emotion may not be in your control and wrong communication can come out ending up in no business or miss-selling. Even if I am not in total control of my own emotions still I should not hasten with my recommendation and force decision on my client if it has some element of biasness. I am expected to be fair to my client. I should know what makes my client happy. Is it excess return or it is safe consistent return? Is he comfortable taking risk i.e. able to bear short term volatility or that short term volatility affects him psychologically?  If short term volatility affects him then have I explained him why it happens and how it benefits also if there is patience and long term investment horizon. Have you ever once explained him all possible risks in detail and how you can help to manage the risk or you have just marketed on the basis of return. In India the fear of losing looms so much in the mind of investors that they lose opportunity of good gain also. As an investment advisor also many refrain to explain risk for the fear of losing the client as it creates negative emotion. A right advice with total benefit for client develops a very solid everlasting lifelong relationship and also a network of such long trusted relationships which will eventually lead to client faith in advice and ultimately help an investment advisor meet his business targets, earn profitability for client (first) then company and finally earn reward for him. We all know client acquisition is very difficult but if client is retained following emotional intelligence way then business growth is always exponential.

Panch Tatva of Human life and Relationship

Panch Tatva of Human life and Relationship

We are made of pancha tatva – prithvi, aakash , vayu , agni and jal (earth , sky , air, fire and water ).  Apart from what God has created (nature, sun, moon, stars, river, mountains etc) whatever human beings have created for which they feel very proud of is all from this panch tatva . You can not imagine a single thing made by mankind which is not from this panch tatva. So one can easily say even the inventions and creation by human beings have happened because nature / God wanted so. Nothing exists on this earth without the approval of Almighty .

I have tried to visualise the panch tatva even in our personal life, in our relationship. For any human being 5 relationships are most important. We get the birth from the womb of mother. We lay in her laps when small kid. Mother is equivalent to earth. Earth only gives you but takes nothing in return. Agriculture products helps us survive , tall buildings where we live and work have their base on earth only , cars , roads on which we move from one place to another in on earth only . Role of our mother is same in our life: makes food for us, gives us with full love and affection.  When we are in any discomfort or pain we put our head in her lap.

Second tatva is aakash ( sky ) . Aakash covers us, how long and how high it exists cannot be  measured . We feel protected in the lap of earth under sky. Aakash in our life is our father. In our life father is one to whom we seek protection if we feel insecure from outside. He is always there to protect from any external risk. In the same sky we find hot sun in day and also cool moon at night. our father corrects us by being tough  when we are wrong but will show mildness when seek forgiveness. Father always represents two extreme  behaviour but both beneficial for us , same as sun and moon in sky .

Third important tatva is Vayu . From the time we are born till death we breath. Vayu is must for our health. A partner throughout our life . Who is our partner throughout life in all situation. It is wife  . She is called ardhangini or better half . She is a constant companion in every stage and situation of life same as vayu . You change a place, do anything but vayu is always your silent companion always to make you alive . Similar is wife . If there is breathlessness or air pollution how uneasy we feel. Similarly a right wife like right vayu makes you feel healthy. Vayu is not polluted on its own, our mistake has made it polluted . Similarly we should not find fault in wife but find whether  we have taken her care properly for a proper relationship to exist .

Fourth important tatva is Agni. Agni is energy in our life. It is in the form of heat which helps in digestion , maintain right body temperature . Any imbalance in our health gets reflected by fever. Excess of agni (sun in summer ) creates discomfort and shortage of it in winter also creates discomfort . So agni is must for us but has to be in balance else problem.   In our life Son represent Agni . We see ourself protected in an able son . His good deeds bring happiness and pride in our life but his misadventure , wrong deeds can even bring pain in our life .

Fifth important tatva is Jal . Jal like earth and moon brings coolness , must for us like vayu .Can we live without water? Water in our body is must to control excess of agni. Shortage of water in our body makes us weak and can be life threatening as well. In our life Daughter plays the role of jal . Her coolness , calmness brings peace and joy . She also plays a very active role in soothing ,guiding her brother and bring balance in life just as water does to agni inside our body . Both agni and jal equally important in our life to maintain balance. similarly both son and daughter are equally important . Both have been designated by nature to play a specific role. I don’t know why people do not give equal importance to both son and daughter and crave only for son when nature has clearly displayed both as equally beneficial .

Lets live the way nature has made the universe, our body, our life and also relationship in our life . Now we should know why family is important? If we understand fully well that we are made of panch tatva , our life is also governed by panch tatva and God also created them in human form in our life as – mother ,father ,wife, daughter   and son . we as individual should respect each of the 5 relationship we have in our life . Yes each of the panch tatva has its own importance but it’s not that we can say one is more important than others and so take care of that only. If that happens, imbalance will happen to our body and then we will have diseases, agony, health problem etc. Similarly in life also each relationship is important. Can’t ignore or should not disregard one relationship for other, else there will be  imbalance and unhappiness in life.

Understanding Riskometer

Understanding Riskometer

Last few years it has been made mandatory by SEBI to display riskometer for every Mutual Fund scheme . The reason behind having riskometer is to make investors aware about the risk associated with that product from the return perspective. The idea no doubt is very good but the way riskometer is displayed needs more clarity so that investors gain confidence and conviction and not get apprehensive or confused .

The riskometer as displayed in the various literatures of Mutual Fund schemes looks as below with ( sample riskometer ) . Interpretation is given on left side ( level of risk ) .

Anyone who invests in any mutual fund scheme has some expectation of return which is either in form of Dividend income and/or capital gain (i.e. profit on invested amount when sold back). It is risk or uncertainty of not getting as per your expectation is what that is displayed .

We find debt funds are usually in low to moderately low category. Very very few might fall in moderate range whereas in equity funds most are in moderate and high and hardly very few in moderate . Equity funds always shown more risky than debt funds so someone who is not so well conversant with equity might fear and not invest in equity fund.

Investors need to understand why and how your principal i.e. amount invested is at risk? But before that lets understand risk.

For most of the new investors risk it means loss or chances of loss. Some think risk means uncertainty in return but that also in downside loss not on upside gain. Risk in investment means uncertainty in return i.e. getting a different return than what expecting.   It could be both upside or downside i.e. in either direction or level from what expected. Here one has to understand expectation has to be realistic and is generally based on past historical average. If someone expecting 15 % based on realistic historical average and gets 7% then there is a risk and if he gets 28% then that is also a risk. So any deviation from realistic expectation is risk whether it is positive or negative.

In investment there are many types of risk and each one of them can affect the assets (debt /equity) and various types of securities within those assets, the performance of the companies and eventually return on investment. The effects can be positive or negative. There are business risk, market risk, economy risk , country risk, currency risk  , credit risk, interest rate risk , inflation risk etc.  The overall impact gets affected in return or performance of the fund.

Riskometer describes Principal at risk . So by above fact it mean principal is more at risk in equity vis avis Debt ? Yes it is true but only in short term. As the time horizon of investment increases and becomes long term (> 5 years) then in fact surety of getting a higher return in equity is more than debt. So one can say Risk in equity is less to zero in long term. In fact if we see performance of equity fund vis avis debt fund on different time horizon say 1 year , 3 year , 5 year , 7year , 10 year ...... one will find that beyond 5 years equity giving better return than debt fund. For a period between 3 to 5 years again most of times equity giving better return than debt. For a period 1 to 3 years it is mix result sometimes equity and sometimes debt has given better return than the other . Yes less than 1 year debt has found be give safe positive return vis a vis equity fund.

In a mutual fund whether it is a debt fund or hybrid fund or equity after doing detailed research money is invested in those companies which are profitable or going to earn good profit soon. Ensuring profitability aspect is the key in fund management. Also while investing whether the security is overvalued or undervalued is also considered and fund manager takes proper care not to go for bargain where there could be identifiable loss. Money is invested in a lot range of companies with a clear objective that the overall portfolio return does not go down. So from where the principal is at risk?

On Asset front return from debt fund is from interest income earned and capital appreciation of debt securities held in portfolio. Similarly in equity fund return is from dividend income earned and capital appreciation of equity securities held in portfolio. Of all these only interest income is fixed and assured. So in a debt fund there is surety of some income definitely coming in fund. The capital appreciation part is affected by interest rate movement so that also is correctly expected by fund managers maximum of time and its likely impact on portfolio is well countered by being in securities with right term to maturity .Equity on other hand is more subject to volatile expectations of investors which reflects in market volatility . The securities held are more subject to steep valuation gain or valuation loss of the security held in the scheme portfolio. The factors causing risk and affecting return are many. Many of them are sudden and bring changes in prices of securities which is difficult to judge in short time. The psychological impact on investors in stock market at times stays for longer period as it takes some times again for confidence building amongst investors . Sometimes the impact is of very short duration. The duration of this psychological impact is also variable  So when principal is at risk here in riskometer means possibility of valuation loss of equity securities are much more than the valuation loss of debt securities in short term. The valuation of securities affect the return and so debt fall under less risky category and equity more but more in short term .

As an investor one should be clear that money is invested in best available companies after thorough research and if the stay is for longer period then investment is equity is less risky i.e. you get return better than debt and as per realistic expectations.