Impact of VUCA on enterprises & individuals
Impact of VUCA on enterprises & individuals

Impact of VUCA on enterprises & individuals

VUCA (volatility, uncertainty, complexity and ambiguity) is an acronym that is presently being increasingly used to describe or reflect as a terminology impacting enterprises and how various functions of the enterprise cope in handling the same, says Dr Rajen Mehrotra.

The notion of VUCA (Volatility, Uncertainty, Complexity and Ambiguity) was introduced by the United States of America's Army War College to describe the multilateral world, which resulted from the end of Cold War post 1989. The end of Cold War in 1989 did impact countries having closed and mixed economy by their movement towards becoming open economies involving reducing, rationalising and in certain cases eliminating the barriers on the movement of goods, services, currencies, people and information from and to other countries. This also resulted in most of these countries moving towards becoming members of World Trade Organization (WTO) and agreeing to the rules of trade between nations. Every country in the world is desirous of improving international trade with the hope of benefiting its domestic enterprises, improving the living standards of its people and also facilitating generation of employment for its citizens. Some of these countries also restructured the state held enterprises through privatisation and restricted the setting up of additional state-owned enterprises.

Recent changes in VUCA that effected enterprises
(iii)
Weak enforcement and poor compliance:
Enforcement by the relevant Government authorities with reference to safety plus most other business related legislation is by and large weak. It is the responsibility of every enterprise in business to ensure compliance of all the applicable laws including those on safety. However, there is a tendency amongst large number of enterprises to take benefit of the gray areas and deviate in areas of compliance. Whenever any major accident or catastrophe occurs, then the electronic media (24x7 channel TVs) swings into action with live coverage plus regular debate on the incident. This not only results in impacting the concerned enterprise but also the others operating in similar business. The relevant Government Department wakes up and immediately swings into action. A recent example of this was the fire that broke out in a rooftop restobar, 1Above and spread to next door pub Majo's Bistro due to flying embers from a hookah at Kamla Mill Compound in Lower Parel, Mumbai on December 28, 2017 resulting in the death of 14 people and over 30 others injured. This resulted in immediate Fire Safety Audits of all eateries in Mumbai by the BrihanMumbai Municipal Corporation (BMC) and ensuring compliance to avoid any such accident in future. This did result in certain eateries in Mumbai being closed and many others required to undertake immediate modifications/alterations to ensure compliance of fire safety norms and other requirements. Non compliance of a similar norms by eatery enterprises are still prevalent in many parts of the country and while there is need for the relevant Government Authorities to act and enforce compliance in not only eateries but every other establishments, it is unfortunate that enforcement continues to be weak and also enterprises do tend to deviate on compliance of safety requirements, thus making their employees and customers vulnerable.

(iv)Handling disaster incident occurrence: Enterprises need to learn handling disaster incident occurrences which can come from varying stake holders. We have three interesting incidents that occurred from three different stake holders (i.e. non government organisation, consumer and relevant Government agency) in India which shook multinational enterprise existence in India, but each of them handled the crisis in their own way and managed to come out of the same. The first incident occurred in 2003 when a Non Government Organisation (NGO) Centre for Science and Environment (CSE) alleged that 12 brands of Pepsi and Coke manufactured by PepsiCo and Coca Cola India Pvt. Ltd and sold in Delhi, India contained pesticide levels many times higher than permissible limits in Europe. CSE had carried out detail studies in its Pollution Monitoring Laboratory (PML) and released the study stating total pesticides in all PepsiCo brands on average as 0.0180 mg/L, 36 times higher than the European Economic Community (EEC) limit for total pesticides (0.0005 mg/l) and total pesticides in all Coca-Cola brands as 0.0150 mg/l, 30 times more than the same limit. The two companies went through a very bad patch with the product sale falling drastically and both the companies reputation and image eroding. The companies adopted a strategy of damage control by stating that they were meeting the specified pesticide level under Indian law and these pesticide levels were also prevalent in bottled water and milk sold in India. Both the companies re-engineered their strategies for operating in India and the pesticide story is history today with both companies prospering and growing. The second incident occurred in October 2003 when customers in the state of Maharashtra, in India claimed that they found worms in the Dairy Milk Chocolates manufactured by Cadbury India Ltd (now called Mondelez India Foods). This resulted in a sharp drop in sales as well as loss of image for the company, which took immediate necessary steps on improving packaging of the product, as well on the transport and storage facilities in the distribution channel including the retailing outlet to regain the lost market and also grow. The third incident occurred in 2015 when an officer of the Uttar Pradesh (UP) Food Safety and Drug Administration based in Barabanki, in the state of Uttar Pradesh in India, ordered tests on a dozen samples of Nestle's Maggi instant noodles at the state laboratory in Gorakhpur and charged the company with violating the law because of presence of monosodium glutamate (MSG) in tested samples of Nestle's Maggi instant noodles. The company did swing into action of damage control by withdrawing all the stock and coming with new stocks later, but the total market for instant noodles in India has been adversely effected including for Nestle.

(v)A policy memorandum issued by the United States of America (USA) Citizenship and Immigration Services on 22 February 2018 tightening H-1B Visa Rules has hit all IT companies including the Indian Companies, as the visa will not be for a three years term, as was the practice earlier. The short duration of the visa is likely to make the transition from H-1B to Green Card next to impossible for the aspiring immigrants. Over the past two years certain Indian IT companies, who expected this change had made efforts to hire more locals for the projects in USA. Now every foreign IT company operating in USA will have to plan to scale up local hiring, even if it costs more. Every country is under pressure to ensure that it generates jobs for the locals and to that extent, there is increasing protectionism being brought in by the concerned governments including USA.

(vi)Operations in India are not insulated from the economic uncertainty created by the actions of the economies like United States of America (USA), Europe and China; We did see the United States of America subprime mortgage financial crisis of 2008 effect enterprises in India, though the impact on enterprises in India was not as high as in USA and other countries, hence there is a need for enterprises to be prepared to face these challenges and have a dynamic approach on tackling such occurrences. Also if the international price of Oil goes above US $ 100/- per barrel, then it is bound to have an adverse impact on enterprises in India with input costs going up and also the exchange rate likely to take a swing.

(vii)Technological advancements: There are certain technological advancements world wide, which change the way business is done and has a major impact on the enterprises. The Fourth Industrial Revolution resulting in the use of Application (App) Platforms and the connectivity through the mobile phone network is increasingly generating new ways in which the business model for enterprises presently and in the future will operate. We have seen the impact of App Platforms in service sectors through Uber and Ola taxis. We are also seeing Disruptive technologies like autonomous vehicles, Tesla's Car, 3D printing which will result in taking over entire segments of industrial fabrication, including dental implants and prosthetic devices. We are also witnessing the impact of social networks interference in politics and impacting elections as has been recently reported. Technological development in certain cases is disruptive with a rebellious future. Artificial Intelligence and digital technology will take over certain category of jobs and enable enterprises to get solutions from any where by any one. World is becoming flat, hence enterprises and individuals need to visualise the impact of technological advancement. The enterprises and individuals need to adapt for meeting the challenges emerging from the development, otherwise in certain sectors of business it will become increasingly difficult to operate and grow. During my school days, I was taught the use of Log tables for ease of multiplications; in my college education while studying engineering I learnt the use of a slide-rule for ease of calculations. When I commenced my corporate career I first used a Facit machine available in the office for calculating totals and in subsequent years used a calculator. In the present days log tables, slide-rule, facit machine and calculators are consigned to history, as most people use calculator app on their phone or also use computers along with suitable software that can undertake the desired calculations as well as analysis. Hence enterprises, have to focus on updating the skills of their workforce, so that they can efficiently perform the assigned roles by coping with the advancement of technology.

Impact of enterprises on persons working for enterprise
In the present VUCA environment, enterprises go through restructuring of all resources including the human resource (i.e. with reference to people working for the enterprises). Some of this may be because of merger between two enterprises or because of an acquisition of an enterprise or because of a closing down of a certain product portfolio or a business division or an enterprise. These decisions of enterprises affects the future career of certain people working for the enterprises. Certain enterprises are switching over to fixed term tenure employment contracts for new recruits. When termination of employment of individuals who were permanent employees occurs at the behest of an employer, there are certain enterprises that do pay an additional financial compensation to the concerned individual at the time of departure, at the same time there are many enterprises that just pay the statutory dues to the departing individual.

In today's VUCA environment individuals, especially executives (i.e. non workers) need to learn on "Loose a Job and Still Earn". For this executives need to be update in knowledge and skill, be innovative and hard working, have confidence in self, be professionally active, have a meaningful network, be prepared to undertake and work in other disciplines. In my corporate career of over four decades I have known and also dealt cases where executives, who were considered capable lose their job for no fault of theirs, but purely because the enterprise undertook an exercise of restructuring (in most cases called right sizing instead of downsizing), or because the enterprise went through a merger or acquisition or closing down of a certain product portfolio or restructured from a Strategic Business Unit (SBU) structure to a functional structure or vice versa. This trend of executives loosing their employment at the behest of an employer is likely to occur in quite many enterprises in the future in India.

However the persons working as workers in India, have an employment safeguard, as they cannot be laid off or retrenched under the Industrial Disputes Act, 1947 unless the appropriate Government grants permission, which in most cases is not easily granted. Hence, any right sizing of this category of workforce is undertaken through Voluntary Retirement Schemes involving acceptable compensation package by the departee worker.

Conclusion
There are enterprises that believe that VUCA is not a sudden and drastic unusual change, as enterprises in India are continuously subjected to such an external environment and hence have learnt the art of Jugad (Hindi word for finding solution within limited and available resources). To my mind VUCA is when an enterprise or an individual goes through sudden and drastic (i.e. tsunami) type of change which will dramatically effect the business or the individual. We need to be prepared to handle VUCA change's both at the enterprise and individual level, as the periodicity with which they occur is presently shorter compared to the past.

In today's competitive VUCA environment it is "Survival of the Fittest and Fastest" and Ultimately, "Jo Jita Vohi Sikander" (to borrow a popular Hindi movie-name! - i.e. the one who wins is Alexander).

Dr Rajen Mehrotra is immediate Past President of Industrial Relations Institute of India (IRII), Former Senior Employers' Specialist for South Asian Region with International Labour Organization (ILO) and Former Corporate Head of HR with ACC and Former Corporate Head of Manufacturing and HR with Novartis India.

The article is based on the valedictory address delivered by Dr Rajen Mehrotra on April 7, 2018 in Mumbai, in the international conference on "Innovative Business Practices in VUCA World" organised by GNVS Institute of Management, University of Mumbai and Bombay Management Association (BMA).

Dr Rajen Mehrotra can be contacted on: rajenmehrotra@gmail.com.

Related Stories

No stories found.
Indian Cement Review
www.indiancementreview.com