Article: Companies have to reduce transaction cost of doing business


Companies have to reduce transaction cost of doing business

Arun Maira, Member, Planning Commission

Companies will have to reduce the transaction cost of doing business


Broadly, business in the next orbit has to operate in an open environment, which has free flowing information and communication. When you look at the systems and processes of industry practiced in the past, possibilities of interaction with customers and citizens have increased manifold and changes in the environment require businesses to work in collaboration with several stakeholder groups directly.
The idea of democracy and human rights was not as strong 20 years ago as it is now. The fall of the Berlin Wall has been symbolic of barriers being broken for the flow of ideas of democracy and free markets across the world. What we are experiencing today is similar winds blowing and changing the business landscape. In a more open and more unpredictably changing world, leaders will have to improve their skills for two critical leadership functions. Firstly, leaders will have to ensure cohesion and secondly, leaders will have to make sense of rapid change and give directions.
One challenge that organizations will face in the next orbit is that companies will have to work toward reducing the transaction cost of doing business. And here, there will be tension as on one hand will be the imperative to construct models of organization with efficiency through standardization of systems and processes, while on the other, the need for innovation and creativity and also to deliver along the dimensions of ethics and social responsibility. The structure of corporations will have to be redefined. Networked enterprises will emerge wherein the various units will be independent yet united at the same time. Leaders and organizations will have to distribute power and stop being autocratic to take faster decisions. It is the challenge the Indian government also has, when all the State Governments are constitutionally empowered to take certain decisions but must be coordinated by the Centre. To operate in the next orbit, leaders will have to possess a special skill set. They will have to be accountable for their own part as well as responsible for the functioning of the whole system. New models of partnership will emerge in which individuality and cooperation will be maintained in governance and in doing business.
Going forward, the kind of people that will succeed will be those who are committed to achieving collective goals; not merely demanding but also helping. Challenges of global climate change, global economy and trade and global security against terrorism require new models of governance and leadership to manage ‘the commons’ more effectively by putting the interest of the system, if not above, then at least alongside the interests of nations, companies, communities and individuals. On these lines, models of societies and enterprises will go together into the next orbit.

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Topics: C-Suite, Strategic HR, #ExpertViews

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