Monday, 31 May 2021

Conflict Resolution key to success

In Corporate world conflict resolution is key to success.  Conflicts can be between employees, with stakeholders, with customer, with vendor, with regulating agencies, with financial institutions etc.  Successfully navigating such conflicts is an art (with some application of science though).  In this article we are restricting our discussion to conflict within the organisation between employees and how quick solutions to them help in achieving better results.

Conflict amongst Peers is the most common form of conflict when employees within the division or from different divisions have differing view points on the same subject leading to a conflict and hence a stalemate on actions and processing of activities / work.  How quickly these conflicts are resolved depends on how the conflict is addressed by the team members or manager or an arbitrator.  

Conflicts are solved by the team members (within the peer group) if as a team they address the issue rationally discussing its pros and cons for each team member and then coming to a solution which is acceptable to all team members.  In this situation usually one team member takes the lead to bring about this resolution.  In this conflict resolution mechanism there is a good bonding among team members as they themselves have solved the conflict and nothing is forced upon them.  This model works only when

  1. Team members are empowered by management to take decisions in their respective areas of operations
  2. Management have adequately trained its team members on the task and all team members are clear (to a large extent) as to their roles and responsibilities in the organisation.  
  3. There is controlled delegation of activities to the team and the managers have good overview of the tasks carried out by the team.  This ensures that the team members are insulated from any trouble during any task or solution for a conflict - this happens because the managers are aware of all actions and watching the same from a short distance and step in whenever there are chances of any trouble brewing
  4. There is acceptance within the team of one time leader amongst them who help solve the conflict.  This leader can be a different person in different situations - acceptance is the key.   This can be achieved only if the team is well trained and good clarity of roles and responsibilities are fixed by the management 

I would recommend this model of conflict resolution to be the best as it brings in bonding among team members and team members feel empowered to know that they are part of the solution rather than the problem, this leads to high level of productivity.  There will also be a high level of ownership in this model as the solution is derived by the group rather than by someone else and pushed into the group, this ensures that the team works to its potential to ensure success as it is their solution and they do not wait it to fail.

Conflict are solved by managers when they step into a conflict situation for which the team or teams does not find a solution and there is a stalemate among the team members.  Though this is not a desirable situation most of the time this happens due to multiple pushes and pulls by each team member or teams since there is no consensus among the team members / teams.  As an effective manager the manager should carry out the below steps to bring about a successful conflict resolution model

  1. Hear out the issues of all team members or opposing teams / team members in detail in presence of all the team members or relevant team members so that there is no exaggeration or simplification of the issue by any team member or team
  2. Brain storm as to the nature of the issue, how it originated and what are the reasons it remains a conflict which is not solved till then.
  3. Encourage team members to prepare and present their solution to the conflict either individually or as one team or multiple teams.  Managers should then study the efficacy of these solutions based on their knowledge and expertise and if found viable support in implementation of this solution.  
  4. Manager should be rational and not take sides or should not engage in favoritism, this will ensure that there is respect for the manager within the team and there is good scope the solution (if any) suggested by the manager will be implemented smoothly.
  5. Encourage team members to be a part of the solution and as much as possible push the team members to engage in the solution creation process directly and create a mirage that the problem is solved by the team members themselves and managers have just an outside role (pseudo role) in the process.  This process will empower the team members and ensure that they take ownership for the solution and implement the same with full enthusiasm and ensure its success. 
  6. Managers should set a time frame within which a solution to be found and implemented for the conflict.  This will create a pressure on team members to expedite a solution or accept a solution proposed.   This process will ensure that the conflict is solved in a time bound manner.  If not a long drawn process will create more problems and with it there will be quite a number new challenges over a period of time to the conflict
  7. If the team members or the team is not capable or not willing to come out with a solution the manager should propose a solution and also ways of implementing this solution in a detailed manner so that each time member understands and same and implements it.  The flip side of this action is that manager should be vigilant and keep track of the progress of the solution as there is little ownership of the solution within the team members
  8. Document the conflict resolution process and the solution in a "Standard Operating procedure" or SOP or any other mode for easy reference to all team members and also to serve as a guide in future for carrying out the task or assignment 
Conflict are solved by arbitrators when team members nor their managers are able to come out with a solution for the conflict.  Usually arbitrators are not appointed but they are usually senior managers who are two to three levels above the manager in the organisation and hence have more powers to bring out a solution to the conflict.  These arbitrators step in when someone requests them to step in or if they identify a long drawn conflict not solved for quite sometime and it affects the performance of a task or an assignment.  Being senior managers in the organisation obviously arbitrators have more power and control over the team / team members and their managers hence an effective arbitrator should carry out the below steps to bring about a successful conflict resolution model apart from the above 8 steps discussed in the manager dispute resolution model
  1. Usually when a conflict gets to the level of an arbitrator it is sure (to a large extent) that a solution is not possible by the team members and solution has to flow down from the top.  
  2. Being senior managers arbitrators have more experience and knowledge of the subject matter, using this expertise they should push for a quick solution to the team.  The arbitrator should ensure that the team internalizes it and delegate the solution to the manager for implementation.  A constant followup is also necessary to check the progress of the solution proposed
  3. Arbitrators should take it upon themselves to train and empower the manager/s and the team members so that over a period of time they are capable of finding a solution for any conflict which may arise in the future.  In this way arbitrators can avoid future conflicts to be escalated to their level thereby avoid eating away their valuable time and resources.
  4. If there are any erring team member who needs to be reprimanded or any action taken arbitrator should in a proper or subtle manner take appropriate action so that the erring team member does not repeat the same problem and creating a conflict again or stalling a solution to the conflict. 
Conclusion

Conflicts are inevitable in an organisation quick resolution in the key, best way to resolve is with consensus among team members as it will bring in high level of ownership.  If the resolution gets escalated to manager or an arbitrator then solution should be implemented and in parallel training should be imparted to team members so that in future they are capable of finding their own solutions for conflict or avoiding conflicts altogether 

Sunday, 30 May 2021

Stock Market Concerns - RBI Annual Report

Some statistics of stock market for 2020-21 financial year 

  1. Sensex surged 77% in 2020-21.   It was 28,265 on 1st of April 2020 & ended at 50,136 on 31st March 2021
  2. Peak was reached on 15th February 2021 @ 52,154 
  3. 25 Initial Public Offers (IPO's) were issued by corporate's during 2020-21 of which 21 had generated positive returns for investors  
  4. Equity market recorded a net inward Foreign Portfolio Investment (FPI) of Rs.2.8 lakh crores during 2020-21 (compared to a net outflow in FPI of Rs.6,024 crores in Previous year)
  5. Direct participation of retail investors was the hallmark for the year 2020-21 with 1.43 crore new Demat accounts opened during the year (compared to 50 lakhs in previous year).  Retail holding in NSE listed companies increased to Rs.13.6 lakh crores from Rs.7.2 lakh crores in the previous year 
  6. Asset under management of pension funds soared past Rs.5 lakh crores

Desipte covid concerns what are the major cases attributed to this sharp surge in stock market in India. 

The market factored in the following factors for the sharp recovery.   Easing of Covid and consequent expectation of recovery in economy, better performance by corporate's especially during Q3 & Q4 of 2020-21 triggering record GST collections, Rs.1.5 lakh crore Performance Linked Incentives (PLI) for key manufacturing sectors, record high FPI inflows during 2020-21, lower interest rate regime triggered by lowering of repo rates by RBI and global economic recovery to name some of the key factors.

Now for the concern of RBI for this sharp upward swing of stock markets.  The following are the major factors RBI lists in its report under the title "Is the Bubble in Stock Market rational"

  1. This order of asset price inflation (77% in 2020-21) in the context of the estimated 8 per cent contraction in GDP in 2020-21 poses the risk of a bubble. 
  2. Results suggest that the stock price index is mainly driven by money supply and FPI investments. Economic prospects also contribute to movement in the stock market, but the impact is relatively less compared to money supply and FPI. This assessment shows that liquidity injected to support economic recovery can lead to unintended consequences in the form of inflationary asset prices and providing a reason that liquidity support cannot be expected to be unrestrained and indefinite
To conclude, meteoric rise in Indian stock market is a cause of concern considering the fact that there is no strong fundamental reason but short term temporary reasons which can reverse any time causing the bubble to burst.  Investors especially retail investors should exercise caution when treading into the market and it is advisable to use a mix of equity and debt to achieve their financial goals

Thursday, 27 May 2021

Milestone - PFRDA - NPS

The Pension Fund Regulatory Development Authority (PFRDA) tweeted on May 26th 2021, that they reached a milestone of Rs.6 lakh crores of Asset under Management.  The best part is the last Rs.1 lakh crore happened in just 7 months (Press Release)


                            Source : PFRDA Tweet 27.5.2021


With asset under management crossing Rs.6 lakh crores and subscribers touching 4.28 crores, PFRDA is on a roll.  

What triggered this upward movement?

  • Fairly good returns on equity investments.  Equity schemes have given around 13% to 15% returns for the past 5 years, some scheme names have been given for quick reference  

  • Fairly good returns on debt (Government bonds) investments.  Debt schemes have given around 9% to 11% returns for the past 5 years, some scheme names have been given for quick reference  


  • Fairly good returns on Corporate bons investments.  Corporate bond schemes have given around 9% returns for the past 5 years, some scheme names have been given for quick reference 


  • On an average a conservative investor can earn a 11% returns which can never be imagined under EPF or PPF

  • Another advantage of NPS is its low cost structure.  Annual cost fees in NPS is currently capped @ 0.1% which is far lower than mutual fund schemes

  • The most attractive part of NPS  is tax benefits under 80CCD(1) - 10% of salary subject to a maximum of Rs.150,000, 80CCD(2) - 10% of salary with no monetary limit  & 80CCD (1B) - Rs.50,000

Major drawbacks of NPS

  • Liquidity - investments are locked till the investor attains age of 60.  Yes there is a partial withdrawal option of 25% of own contribution but this will be a small portion

  • At time of withdrawal if corpus is more than Rs.5 lakhs then 60% of the corpus can be withdrawn and balance 40% should be compulsorily invested in an annuity.  Income from this annuity is taxable

Conclusion

NPS is a good investment vehicle for the long term which gives superior returns and tax savings.  Cost of maintaining NPS being low also brings in more attractiveness to this scheme.  Though there are draw backs on liquidity and tax on annuity, NPS is a superior scheme for investment which I recommend.

Wednesday, 26 May 2021

Sensex - Reducing fear of Covid?


Sensex closed today @ 51,017 points which is just 2.2% short of the all time high of 52,154 reached on 15th February, 2021.   


2021-22 has clocked till now 2% increase in sensex or 988 points.  Today market posted strong gains due to gains mainly in financial & IT stocks.  Nifty financial services index increased by 0.52% & Nifty IT index increased by 1.76% during the day to move up the index. 

Stocks are projected to be uptick in the short term due to reduction in Covid infections in India, expected better performance of Indian corporate's and rising trend in US & Europe stocks   

Tuesday, 25 May 2021

Black Gold Inching towards 100 - Roll it back

Per litre petrol Cost today 25.5.2021

Mumbai : Rs.99.71
Chennai : Rs.95.06
Kolkata : Rs.93.49
Delhi : Rs.93.44

Let us take Chennai for further analysis.  

Price of WTI crude on 1.1.2020 - $ 61.13 per barrel
Price of WTI crude on 25.5.2021 - $ 65.65 per barrel
Increase % = 7.4%

Price of 1 litre petrol in Chennai on 1.1.2020 - Rs.78.20
Price of 1 litre petrol in Chennai on 25.5.2021 - Rs.95.06
Increase % = 21.6%

What caused this disparity? Why so high increase in domestic petrol prices?

Is it Currency?  No only marginally

USD vs INR on 1.1.2020 = 71.36
USD vs INR on 25.5.2021 = 72.79
Increase % = 2%

Is it Taxes in India?  Yes significantly

Twice in 2020 taxes were increased on petrol (March & May) - totally Rs.13 per litre or 65% increase in tax from Rs.19.98 to Rs.32,98 per litre in 2020
Overall impact on petrol price per litre = 17%

Indirect tax collections in 2020-21

Provisional figures released by Government on 13.4.2021


Shortfall of Rs.0.5 lakh crores in GST collection was more than offset by an increase of Rs.1.46 crores in central excise collections which mainly constituted tax on petrol & diesel.  The increase of 12% in indirect tax collection is mainly because of higher tax on petrol & diesel.

What the Government should do now

With the economy projected to get back into normal mode in Q3 2021-22 there should be a push for industrial development consequently improve collections under GST.   In parallel there should be a reduction in excise duty on petrol & diesel to pre 2020 levels and reduce inflationary impact on the economy.  It would do a world of good if Petrol & diesel are brought under GST ambit rather than erstwhile excise & VAT regime

Will the Government Act on this or push for more taxes on fuel and thereby fueling inflation which is the last thing the economy wants at this moment 

Monday, 24 May 2021

Crpto Currency - Waiting for a reason

Crypto currencies had dream run with its main constituent Bitcoin in 2021 up until  April rising over 97% from $29,111 in 1st of January 2021 to $53,260 in 30th April 2021.   Then the drop started in May by 34% and now trading at $ 37,707 which still is a good growth of 30% for 2021.  



The market capitalisation of crypto currencies stood at $1.58 trillion on 24.5.21 which was $2.2 trillion on 1.5.21, in 25 days time a whooping $ 620 Billion has vanished in investors wealth.  
  
What triggered this slide in May?  Two factors are cited, one Elon Musk (Tesla).  Tesla stopped accepting Bitcoins as payment for their cars, there was also talk of Tesla selling off some of their Bitcoin holdings.  Tesla cited environmental concerns caused by crypto currency mining as its main reason for not favouring Crypto currencies this is an U-turn by Tesla from its earlier statement.  

Second reason is China announcing that it will crackdown on crypto currency mining as a part of an effort to control financial risks and also to control high electricity consumption which are gulped down by Crypto currency miners who are majorly concentrated in China 

Question : Are the above the major factors to wipe away value from crypto currencies and will these factors continue to determine value of crypto currencies in future?  To my knowledge No.  Crypto currencies were moving up mad @ 97% in the first 4 months of 2021 and it was looking for some reason to wind down when it conveniently found reason in Tesla & China and dropped 34% in one month.  Now that crypto currencies are down from their high levels they will look to consolidate in the days to come and again look for excuses to move down or move up.  Volatility is a hallmark of crypto currencies and it will always play a major part as there is no regulation from Governments and it will find some reason for moving up or down dramatically making headline news everytime.

Sunday, 23 May 2021

Just a spoke in the Growth Wheel - All is well still - Will be back in track in Q2 & Q3 of 2021-22

All was going on well till mid of February when Covid made a big comeback into India and now has started to slightly taper down albeit slowly.   This surge will stunt economic growth as demand drops and people start to become cautious again and start to increase their savings rather than spending.  Jobs are once again in the spotlight with hospitality and entertainment sector ensuring many of them vanish leaving earnings to drop significantly.   Good news is that there is no full lockdown similar to last year.  Lockdowns now are only regional ones now, those too ensuring economic activities are not stunted to a large extent leading some scope for earnings to happen.  A bold step by the Government is implementing vaccination for all adults of 18+ from 1st May, this is the only way to contain the virus added with following Covid protocols by all citizens of India.  Industry which saw smart recoveries in Q3 & Q4 of 2020-21, will take a hit in Q1 of 2021-22 and look for revival in Q2 once the pandemic is contained.  Reserve Bank of India (RBI) Industrial outlook survey of the Manufacturing Sector for Q4 2020-21 was released on 7th April 2021, which was projecting quite an optimistic picture for the industry for Q1 of 2021-22.  Will that be realised?

                   Source : RBI

Q1 of 2021-22 will show a subdued growth in contrast to RBI projections due to unprecedented covid surge.  Indian corporates proved their resilience in Q3 & Q4 of 2020-21 but it will be a difficult task in Q1 & Q2 of 2021-22, recovery should start from Q3 of 2021-22.

Stock Markets

Recovery of business and hence stock market was quite upbeat in Q3 & Q4 clocking an upward swing of 20%, in contrast the months of April & May 2021 till now has seen a see-saw swing and expectations are bears will rule the market.     

                                                         Stock Market Movement 



Corporate results for Q1 2021-22 is expected to be subdued and markets will factor in the same in Q1.   Should expect a flat or depressed market for 2021-22 albeit some short term volatile movement and rallies 

Rupee Movement 

Q3 & Q4 saw Rupee strengthening or holding ground due to better corporate and stock market performance.  


Q1 2021-22 (April) saw a sudden depreciation of the Rupee due to Covid surge and domestic stock market weakness.  However uptick in stock market movement & general US Dollar weakness (Dollar Index) helped Indian Rupee to move towards appreciation mode.  My prediction is Indian Rupee will be under depreciation mode till business sentiment moves up and Covid fears subside in Q3 2021-22.  When Rupee depreciates it will be time for RBI to intervene in the markets and ease out the Rupee a bit and to ensure cost of inputs especially oil do not spiral out of control consequently sending inflation into a tail spin, which is the last thing the country wants which is already reeling under pandemic stress.  

Oil Prices

With economies opening up crude oil is back in focus.  In Q1 2021-22 there is a 2% appreciation in Crude WTI from $ 61.45 to a barrel to $ 62.78 per barrel


Projection is crude will continue to marginally raise over the next two quarters in line with economic activity pick up

Conclusion

There will be a economic slowdown in Q1 2021-22 & part of Q2 also.  Q3 & Q4 of 2021-22 will bring in recovery and all will be well soon