The day had been hectic. All these new accounting standards have extended the time devoted by Dev on audits, but with no commensurate rewards from the clients. In fact, he was finding it hard to extract all the necessary information from them. When he tried to convince them that it was a mandatory requirement, the clients retorted back that it was the Institute of Chartered Accountants of India that took the initiative. So the fault lied with the CAs only. Last month only he lost a valuable client who was reluctant to allow him to qualify his audit report in connection with inter group transactions and loans. Another client was lured away by an MNC audit-cum-consulting firm. With the rationalization of tax rates, his expertise of tax planning was losing the charm for the clients. With more possibility of transparency, some of them were attracted towards consultants who were offering promises of providing solutions to face the downturn with attractive solutions like restructuring. "Thank God, Bharat Garments is not one of them," he thought.
It was Saturday evening and Dev was thinking to leave office and join his family for the weekend, finally after three hard weeks which deprived him and his family of the ever so scant joy of a carefree and fun-filled weekend. 'Finally', he talked out loudly. And suddenly the monster on his table started ringing. Reluctantly he picked it up. It was Bharat Prakash from Bharat Garments, the second son of Ram Prakash, his most valuable client for last two decades. He wanted to see him immediately to discuss something private and urgent. Dev said, "Can we keep it for Monday." "Not possible, I am supposed to fly to Delhi on Monday morning." Reluctantly, Dev agreed. He thought - "better today than tomorrow." At least the Sunday will be free. "I will be there by 7.30," said Bharat.
Dev has grown with Bharat Garments. When they became his clients, Ram and his brother Mohan have just started the company. Over the years, the company has grown from a turnover of Rs. 45 lacs to Rs. 275 crores. In the last few years, the two sons of Ram, Ratan and Bharat and one son of Mohan, Mohit have also joined the business. Although Ratan was only a graduate, Bharat has done his MBA from the US. Mohit was a software expert and an MBA, again from the US. Ratan was looking after sales and finance, while Bharat was in marketing. Mohit was handed over the charge of production against his wishes. He was more inclined to go into systems and strategies. But the problem was that Ram, senior of the two brothers, was accustomed of gut-feel decision making. He rarely glanced through the various reports prepared by various staff members. He didn't believe in detailed planning. Mohit was left with no choice but to look after production. The dichotomy was that being an excellent planner, he has really been able to bring the production cost down by 4%. His success has become a prison for him.
Ten years back, Ram hired a consultant to prepare a viability study on manufacture of yarns. Despite emergence of Surat as a cheaper supplier of yarns due to various tax soaps offered by the Gujrat Government at that point of time and the dubious practices of most manufacturers in Surat, the consultant recommended that putting up a unit in Mumbai would be highly profitable. Ram acted on that advice and lost heavily.
Second time, a consultant, Raghavan, was appointed on insistence of Bharat, to do the strategic planning and recommend a restructuring plan for the company. Since, much information was lying outside the books and was not passed on to the consultant, the suggestions turned out to be unrealistic. Raghavan was the product of corporate world. At one point, he recommended total separation of ownership and management, but Ram rejected it outrightly. Raghavan felt that family managers were not suitable for management roles. At another point, Raghavan recommended downsizing and without qualifying his statement, dropped the hint that some people from all the departments had to go. This scared the hell out of the second tier. As a fall out, they became skeptic and stopped cooperating with Raghavan. Thereafter, Ram had little respect for consultants. For Ram, strategy and system were alien words. When the issue of appointment of Raghavan was discussed, Ram and Ratan have offered a limited assignment to Dev, but Dev had declined thinking it was not his cup of tea. Dev felt that he should stick to his core areas of audit and tax planning. Later on, Dev was able to lay his hands on the report submitted by Raghavan. He could see that in areas like scope for cost cutting and in ownership restructuring, Dev himself could have done a better job. When Dev pointed this out to the owners, they got annoyed that when the job was offered to Dev, he refused to take the responsibility and now he was being critical. Dev knew deep inside that even if he would have accepted the assignment, the rewards would not have been commensurate. Since the relationship went back to the start of his career, when he was relatively less hard-pressed for time, he provided many services free of cost. In the process, he was being taken for granted. The second problem was that although he could think logically, he believed he hasn't developed the art of structured communication. He might not have appreciated the quality of the content, but he envied the quality of the presentation made by Raghavan.
His thoughts were interrupted by the arrival of Bharat. "Hi! Sorry to hold you up. But you have to help me out. Our competitors have already entered in collaboration with a strong foreign company. Mohit and I have also been negotiating with this party from France. But dad is not very enthusiastic about the proposal. Ratan is also not supporting us. You know Ratan. He feels that we will lose management control over the company. I know he is more concerned with the 'control' part of it than the 'management' part. What management is he talking about? He controls sales and finance. That way he has complete control over inflow and disbursement of money. With his typical accountant mindset, he treats all outflows as expenditure. I know how difficult it has been for me to get money sanctioned and disbursed for advertisement. Field staff is also not happy with him. He is more concerned with supporting and vouchers than the performance. Amit Shukla, our star prformer, left one week back. You know why? Ratan has blamed him of dishonesty. The poor boy didn't attach the copy of first class rail ticket. We know that the sales staff might take some advantage by traveling third class while presenting vouchers for first class. How does it concern us much so long as the guy delivers?. While we negotiate salaries, we always assume this factor and keep the fixed pay down. And later we react as if it was something new. To some extent your audit staff are also responsible. They make such a noise for these issues."
"But you see, it is their job," Dev defended, "And I have ignored their notes whenever reasonable explanations were offered to me. In last audit, I came across many expense claims by you. You didn't submit proper bills for your credit card payments and traveling. I always have hell of a time convincing the assessing officer. Please take care of these things by the time I come for the audit. Anyway, I believe you haven't come to discuss these issues with me."
"Hell! No! The problem is that you come in picture only after the year has passed, only to dig into the past. Why don't you participate in development of the process itself? And the fact is that dad and Ratan trust you so much. But you don't want to get into anything other than post-mortem. Anyway, this time you can't get away with it. You must convince dad about the necessity of entering into collaboration, otherwise you know, we will be wiped off."
"But how do I support you if I don't know whether you are right or not. I don't know any facts. Look, I still repent supporting you on the public issue matter three years back. You people have messed up with everything. You still run the company as a kiraana shop. All the independent directors on the board are dummies. I feel bad about asking many of my friends to invest in the company." Bharat was a bit taken aback, but he recovered and said, "Dev, tell me this - I was an immature person then, but you are a professional. I had hoped that things will change once we go public. I might have made a mistake, but you know my father and uncle for last twenty years. You should have warned us or at least prepared us accordingly. Don't you have any influence on my father? Did you ever try to convince him to change the management culture in the organization, to hire more professionals and to put proper systems in place?" "I did once, but he was not willing to listen." He said, "Come on Dev, who built this company? How can those managers have the passion and commitment that my family or I have? And if they know how to run a business, why don't they start something of their own and show their competence? The other day a friend of mine was telling me how these so called professional managers have spent crores of rupees and yet could not sell a product the company has come out with, while three other competitors were already selling similar products. You see I still travel to Delhi by train. But these managers want to go by flight only. My money is hard earned. I can't allow them to party over it." The other part of the conversation Dev didn't tell Bharat. Ram has also said to him: "Bharat tells me to replace many of the existing distributors. How can I let down my relatives and old friends? And I can't understand why he interferes with sales? Poor Ratan is already having a tough time with competition heating up. He works so hard handling both finance and sales. I am proud of him. He is right in saying that if we appoint professional managers, they will pass on our trade secrets to competitors once they leave the company."
"He used to tell me these things in the beginning, but has stopped now. In fact he is far more liberal these days after seeing how Gautam uncle, his friend, has grown over the years with many professionals working at top positions," said Bharat. "Anyway, coming back to the main issue of collaboration, they want to hold minimum 50% stake in the company. Since 25% stake is with public, we will be reduced to holding 25% only. Moreover, they are not inclined to join in a listed company. But here is the big problem. They want to see our succession plan. They say that given the fact that our family is big and participates in management, they want to make sure that the future of the company will not be compromised in case of any dispute in the family and secondly that the transfer of 50% shares in their name will be hassle free. They would appoint an auditor to complete the due-diligence process. I have heard that you have been actively involved in a successful due-diligence process with one of your clients - Garima Automation." "Yes, you know that, but you don't know what happened after that," Dev thought. They have appointed another big audit firm as statutory auditors. Since he has impressed them with his methodical approach, they have however appointed him as internal auditor. The fact however was, that Dev has started enjoying this role. His ego was initially hurt, but the reward had been good and he was finding the job more challenging. It allowed him a deeper insight of the client's business and he was able to make major contributions in the strategic process.
"I can talk to your father, but first you must convince me about the viability of the collaboration project." "For that you need to talk to Nosy. It was his brainchild." Bharat replied. "Nosy?" Bharat was perplexed. "Oh, Mohit. He used to have a running nose, so we all call him Nosy. We can meet you tomorrow and explain everything. Tomorrow, at The Club, 12.30 sharp," Bharat said. Dev immediately saw the grim faces of his wife and the children. "Not tomorrow, we can make it on Monday." "But I'll not be there," Bharat protested. "I've already heard you. If you don't mind, I can see Mohit alone," Dev asserted. "As you wish," Bharat said. Dev could feel the note of discomfort in his voice. "And not at The Club, but at my office only - preferably at 4.00 pm," Dev concluded.
Mohit was humble and silent type. Only on one previous occasion, Dev was with Mohit for about five hours - when he went to the factory with the representatives of financial institutions. He hated the drill every year of explaining to the FIs the faulty systems and processes at the factory. But for the first time during his association with Bharat Garments, he was relieved to find everything in order. "The guy is smart" is how Dev felt about Mohit. Hence, when Bharat mentioned that Mohit was instrumental in negotiating with the prospective collaborators, Dev felt a little comfortable.
Just before the meeting, he started thinking. "I wish Ratan could take a clue from Mohit. I've been telling him to strengthen the accounts and finance department and to network plants and branches with the HO. But Ratan would not heed my advice. I always feel he is not being open and transparent with me. The guys around him are committed and loyal. But they are all timid. Last time I sent a smart senior manager to assist Ratan, the man left within three months."
Dev enjoyed his meeting with Mohit. He was convinced on the necessity of collaboration. But he was worried about the reaction of Ram Prakash. He was also worried that he was supposed to enter an area which required different expertise. He was confident of his ability in his core area and also in areas which required structured and logical thinking. His recent success with Garima as a party to developing strategic plan has convinced him about the versatility of his talent. But this was a different ball game altogether. Or was it? He was not sure. So he sought the opinion of Mohit. Mohit replied, "I can't understand why you think it is different. I've seen in the US that this field, popularly known as 'family business consulting' is dominated by CPAs. This is where we conclude this meeting. You think about it. We can have another meeting soon. Bye."
Dev could not understand whether he was feeling relieved or confused. He started thinking. There were too many questions:
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There are many good thoughts in the book 