ROE has a new formula…

Ask a finance majors the meaning of ROE….ala computer generated voice software either of the two or both these answers would pop out: Return on equity and/or (PAT/Net worth*100). It is good to be a student all your life. But when the same student holds an important portfolio in corporate, the equation changes; not only his but ROE’s as well.

                ROE has a new formula – ROE = stakeholder’s confidence. The stakeholders do not consist of only the investors better known as shareholders, but every entity right from customers to employees associated with the organization. The logic behind considering ROE as the true indicator of profitability and performance is that its trend has direct correlation with stakeholder’s confidence level in the company. As Warren Buffet rightly says “he doesn’t invest in business, he invests in people”, it becomes imperative for the management to take the right financial and operational decisions that sustain growth rate.

                If the company’s ROE is anywhere less than the industry average, the concerns about consistency automatically pop up. It either happens due to lower margin, huge capex leading to higher depreciation and higher interest costs. It is important to reckon the required financial variables proportionate to the business model to achieve the target ROE. Any one of them miscalculated can lead to profit mishaps.

                After all there is only one thing asked in the business world “Bottom line kya hain boss?” The bottom line is that the “bottom line” is at the “topline (mind)” every time.

SOFT SKILLS….NOT THAT HARD TO DEVELOP

            A philosophical statement once told to me by a friend during college days always answers my many doubts: successful people don’t do different things…they do things differently. This is applicable to both - personal as well as organizational. Is it only the knowledge factor and street smartness that contributes to their success? Absolutely not. There are certain soft skills that lead to development of all the other required skill sets to succeed.

            “Soft skills training” is gaining immense importance lately in the corporate world and not without reason. The basic simple philosophy behind this is that an organization succeeds only if the employees have the urge to make it happen. Organizational targets are achieved only if individual targets are achieved. Standing in the market is achieved only if the employees in each department have one….because an organization isn’t made of walls and roofs but of people. Else it is just an office…like a life without soul.

          The soft skills development training programs are conducted to bring out the qualities which are already innate…but with neglect over the years they are lost somewhere. The list of those skills can run up to pages like attitude, perseverance, punctuality, communication skills, inter personal skills etc. But the aim of these is just one: self development finally leading to organizational development.

           Well…it isn’t hard to develop them as the name itself suggests “soft” skills.

THE FIFTH “P”

Do not Google it…you won’t find it. That fifth P of marketing is “PAISA”. As it is rightly said “everything boils down to numbers…. my friends”. If you cannot “quantify” you do not “qualify”.

How many times you as a marketing person complained or cribbed about finance department for non approval of budget saying “finance guys do not understand marketing”? Quite often!

But we have never tried to ask ourselves the same question other way round “do we understand finance”. The most obvious and outrageous question on your reddened face after this statement would be: why in the God’s name do we need to understand finance? Let me illustrate a simple example…there is a new liquid mosquito repellent in the market which is priced equivalent to a popular French perfume (>Rs2000). The next day’s newspaper says people flocking the departmental stores to buy the mosquito repellent. Would you believe it? You definitely need to be living in 23^rd century to believe this. The reason: the product is not “worth it”.

“Worth” is the word that answers the question for knowing finance. If we understand worth at a personal level then why is there a difference in opinion at the corporate level? You might have the best product in the world and your emotional attachment may be greater than Romeo and Juliet’s affection for each other. But the ground reality is one cannot stretch the budget to market it beyond limits. It is a simple profit and loss analysis: the demand for the product, probable sales to be generated, margin expected on it. So whatever is left should be the ideal marketing budget…no rocket science. It is better to understand this and sort it out with the finance department rather than getting frustrated later on.

The expenses for marketing which do not generate profits later on are not marketing expenditure but CHARITY. And we are here to do business…..any second thoughts?

It’s not only words…

                Boyzone must be really ecstatic at the title thinking that someone has released a sequel to their most popular song till date. However, it’s not a song that’s been discussed here.

               
                So, what is language? Definitely it is a collection of words either written or oral in a particular dialect, spoken or written in a particular form for effective communication. But then why is it said actions speak louder than words? Taking the above question as reference, I would like to logically conclude to a different form of language usually ignored while being on the speaking side but observed cynically on the listening side….BODY LANGUAGE.

               
                It isn’t strange that this phenomenon is receiving a lot of impetus lately. It is mainly owing to diversity in organizational cultures. Facets such as posture of an individual during meetings and presentations, attire and conduct in a sales pitch, listening skills and facial expressions are now considered a part of communication in the corporate….a communication that cannot be spoken or heard but can be clearly seen with naked eyes. It takes a second to decipher about a person’s attitude based on his or her body language at any given time.

               
                Like a smile can suffice thousand words of gratitude, a frown can do that for criticism. In both the cases one doesn’t need to speak. His body language becomes the narrator of his mood and attitude. It is ironical that years are spent to learn languages that are bound to particular region or country but a language that is universal is ignored. 

              
               A spoken lie is treated as diplomacy but a behavioral lie is treated as a lie….something which is dangerous for survival in the corporate. So mastering the grammar of body language is as essential or may be more than mastering the diction of English language…